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Debt-Related Tax Issues - Mini CourseCode: 22-DEBT2
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Course description and objectives:
This course brings the practitioner up-to-date information on tax issues affecting interest and debt. It covers the definition of bona fide debt, the avoidance of equity and lease treatment, imputed interest rates and debt modification. The various types of interest and their required allocation are explored and reviewed. For the economically troubled client, special attention is devoted to debt cancellation, repossession, discounts,
and foreclosure. The program also discusses installment sales, equity participation debt, taxable interest, and bad debts.
After reading the materials, participants will be able to:
1. Describe and define “interest,” list its key components, and determine whether the various types of interest are tax deductible or nondeductible.
2. Deduct interest that is paid or accrued during the tax year applying different methods of accounting, compute the applicable federal rate, show the effects of unstated interest on transactions, and implement the imputed interest rules to debt instruments.
3. Using the interest allocation rules, determine the allocation period for a loan, differentiate between the allocation of loan proceeds that are deposited in an account and the allocation of loan proceeds received in cash, and arrange loan repayments in the order they are deemed repaid.
4. Detect when certain distributions commonly referred to as "dividends" are actually interest, and describe the tax treatment of interest that is earned on such items as income on frozen deposits and U.S. Savings Bonds.
5. Identify an installment sale transaction, apply the installment method, list the three parts of each payment on an installment sale, and summarize the related party sales rules of §453.
6. List six exceptions to the general income inclusion rule and explain their effect on the taxpayer, and contrast the effects of nonrecourse indebtedness from the effects of recourse indebtedness on foreclosure.
7. Classify bad debts into basic categories, discuss recovery of nonbusiness bad debts, determine when a business deducts its bad debts from gross income, and conclude which accounting method to apply to business bad debts.
Presentation Method: Self-Study
CPE credit: 2 Hours
Program Level: Update
Advance Preparation: None
Exam expiration date: Participants must submit exams for grading within one year from the date of purchase