CPE Self-Study

Choice of and Formation of Entity - Tax Staff Essentials

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Choice of entity issues are relevant throughout the life of a business. When starting a new business, a crucial first decision is choosing the correct form of entity to accomplish the company’s goals. Likewise, it is equally important to know when an entity change is needed as well as the tax consequences of the sale or liquidation of the various forms of doing business.

This CPE course provides an overview of the ever-increasing tax advantages and disadvantages of general and limited partnerships, C and S corporations, LLCs, and LLPs, as well as individual proprietorships. It will help you hone in on the key issues surrounding the myriad of factors that drive the optimal form of organization for a business. The course also includes several case studies from real-life client situations.

Key Topics:

  • Tax consequences of formation under various entity types
  • Transfers to a corporation
  • Transfers to a partnership
  • Series LLCs
  • S elections
  • Allocations in flow-through entities
  • Distributions by corporations, partnerships, and S corporations
  • Sales and reorganizations

Learning Objectives

This course will prepare you to do the following:

  • Identify which entity forms do and do not provide a business owner with protection from personal liability for business debts.
  • Calculate the gain or loss to be recognized when property is transferred to a corporation in exchange for stock.
  • Determine the gain or loss recognized when property encumbered by debt is transferred to a partnership in exchange for partnership interests.
  • Determine a partner’s basis in a partnership interest received in exchange for property.
  • Identify the requirements for a .Section 351 tax-free contribution of property to a corporation in exchange for stock.
  • Identify substantial economic effect with respect to partnership allocations.
  • Identify the three methods of making Section 704(c) allocations specified in the regulations.
  • Determine whether, under a given set of circumstances, a partnership may disregard the allocation rules of Section 704(c).
  • Identify the structure and consequences of using stock appreciation rights (SARs).
  • Calculate the effect of a distribution on the basis of an S corporation stockholder’s shares and a partner’s partnership interest.
  • Distinguish the effects of a distribution of appreciated property in the context of a C corporation, an S corporation, and a partnership.
  • Choose the correct order of accounting for distributions from S corporations having earnings and profits.
  • Distinguish between the methods of effectuating corporate divisions by means of split-ups, slit-offs, and spin-offs, respectively.
  • Identify the consequences of a partnership merger.
  • Indicate the tax consequences of an S corporation liquidation.

Who Will Benefit?

CPA firm seniors (and above) and other tax professionals looking for the best techniques to select various entity forms to solve their clients’ tax and business problems


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Find out more information on the Tax Section.

Table of Contents

System Requirements

About the Authors

Charles A. Borek, CPA, JD, MBA

Columbia, MD

Chuck Borek is a CPA and attorney with over 20 years of professional experience dealing with both business and nonprofit clients and has served in the capacity of officer and board member for several entities. He is also an award-winning speaker on a variety of accounting topics, having conducted over 300 live and web-based presentations across the country.

After serving for several years as a partner in a regional CPA firm in the Washington, DC area, Chuck founded The Borek Group, LLC, which develops professional education materials for both CPAs and lawyers. He concurrently acts as a consultant to the Columbia, Maryland firm of Davis, Agnor, Rapaport & Skalny, LLC.

In addition to his professional experience, Chuck has taught graduate students at American University and at the University of Baltimore and undergraduate students at Prince George's Community College in Maryland, where he held the position of Associate Professor of Accounting from 1998 to 2003. He is also a former Commissioner on the Howard County (Maryland) Pension Oversight Commission. Chuck has authored multiple books, articles, and professional publications for many organizations, including AICPA and BNA. He is currently working on several projects for a variety of publishers.

About the Publisher


About the AICPA The American Institute of CPAs is the world’s largest member association representing the accounting profession, with more than 412,000 members in 144 countries, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting. The AICPA sets ethical standards for the profession and U.S. auditing standards for private companies, nonprofit organizations, federal, state and local governments. It develops and grades the Uniform CPA Examination, and offers specialty credentials for CPAs who concentrate on personal financial planning; forensic accounting; business valuation; and information management and technology assurance. Through a joint venture with the Chartered Institute of Management Accountants, it has established the Chartered Global Management Accountant designation, which sets a new standard for global recognition of management accounting.

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