Core Concepts: A Student s Guide to Corporate and Partnership Tax

This book aims to introduce students to the complex world of business taxation. Through cases, problems, and explanations, it explores the rules that aim to impose taxes on business income and the tax-planning strategies that businesses use to reduce their taxes. The core problems of valuation, realization, net income, tax deferral, income shifting, and substance over form all help explain most of the core problems in the taxation of business income. This book provides a short, readable introduction to business taxation. It makes use of the six concepts mentioned above to sketch an overview of the major issues in corporate and partnership tax. The six concepts help unify the two subjects, revealing the connecting threads. This short book cannot, of course, cover all the technicalities that will be discussed in the deep-dive tax courses on corporate and partnership tax. But most of the big legal topics are covered here, with an explanation tied to one or, often, several of the six concepts. Even more so than basic tax, business taxation considers complex transactions and deliberate tax planning. This book includes illustrations drawn from the case law and real-world transactions. And to help students understand the transactions, there are two special features. First, most chapters now include at least one problem with a detailed answer, which professors will find to be essential to digesting the complexities of business taxation. Second, many chapters also include a new feature, called Business 101, which introduces business forms and common deal structures. This will help students understand terms such as redemptions, reorganizations, and substantial economic effect. All of the dynamics of this area come together in an ongoing tax conflict. Business interests tend to like formalities, not least because big business loves the tax-planning opportunities that arise when the rules deviate from economic reality. The IRS, for its part, tries to import substance into the tax arena, but sometimes its efforts create complexity without accomplishing much in the way of reform. The Congress is a rogue actor in all this, because it sometimes fights on the side of business and sometimes on the side of the IRS. If all this sounds complicated, that s because it is. A relatively straightforward conceptual problem substance over form motivates a great deal of the legal complexity in business taxation. This book demonstrates how the law seesaws back and forth between substance and form; there s rarely a perfect outcome, a stable rule, or a lasting compromise.