Area 2: Entity Tax Compliance (30-40%)
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| Section | Topic | Key Rule |
|---|---|---|
| IRC 83(b) | Property transferred for services | Election to recognize income at grant (not vesting); must file within 30 days |
| IRC 199A | QBI deduction | 20% deduction for pass-through income; W-2/UBIA limitation above threshold; SSTB phase-out |
| IRC 267 | Related party losses | Losses disallowed between related parties; deferred until gain recognition by transferee |
| IRC 302 | Stock redemptions | Sale treatment if substantially disproportionate, complete termination, or meaningful reduction |
| IRC 318 | Constructive ownership | Family, entity, and option attribution rules for determining stock ownership |
| IRC 332 | Subsidiary liquidation | Tax-free liquidation to 80%+ parent corporation; carryover basis under 334(b)(1) |
| IRC 336 | Liquidating distributions | Corporation recognizes gain/loss as if sold at FMV; exception for 332 liquidations (IRC 337) |
| IRC 351 | Corporate formation | Tax-free transfer of property for stock if transferors have 80% control immediately after |
| IRC 409A | Deferred compensation | Strict timing rules for deferral elections and distributions; 20% penalty + interest for violations |
| IRC 465 | At-risk rules | Losses limited to amount taxpayer has at risk (cash + recourse debt + qualified nonrecourse for real estate) |
| IRC 469 | Passive activity losses | Passive losses only offset passive income; $25K rental allowance; released on disposition |
| IRC 704(c) | Partnership contributed property | Built-in gain/loss allocated to contributing partner; prevents shifting pre-contribution gain/loss |
| IRC 721 | Partnership formation | No gain/loss on contribution of property to partnership; carryover basis |
| IRC 743(b) | Partnership basis adjustment | Optional step-up in basis of partnership assets on transfer of partnership interest (requires 754 election) |
| IRC 754 | Basis adjustment election | Partnership election for inside basis adjustments on transfers (743b) and distributions (734b) |
Section 351 tax-free corporate formation requirements: transferors must transfer Property solely for Stock and have 80% Control immediately after the exchange. Boot received triggers gain recognition.