1. Corporate & Partnership Tax - Instructor: Dwight Drake Taxation of Business Entities Law 537 University of Washington School of Law Instructor: Dwight Drake Spring 2009

2. Corporate & Partnership Tax - Instructor: Dwight Drake Contact Info – Office Hours Email: djdrake@u.washington.edudjdrake@u.washington.edu Phones: 206.616.6385, 425.281.1493, 425.222.5988, 360.778.1862 URL: URL: http://faculty.washington.edu/djdrake/Corporate andPartnershipTaxation.shtml Office Hours: Room 416 - Wednesday 1:30 p.m. to 2:20 p.m. - Whenever else you can catch me!

3. Corporate & Partnership Tax - Instructor: Dwight Drake Course Objectives Substantive knowledge base – Corporate Taxation Develop, hone tax learning skills Internalize the “Concepts” Strengthen analytical, problem-solving skills Introduce the planning process Your role – design, not default

4. Corporate & Partnership Tax - Instructor: Dwight Drake Some Tips… First: Beat Up Code. Learn to talk Code Find the “Concept” of each section. Then Text and Regs. to fill gaps for you. First work Problems hard on your own. Download PP Slides in advance of class – reconcile with your own answers. This is key learning moment. Think and mentally prepare your pitch. Track class discussion. Write personal summary following class. Get ahead – Stay ahead!

5. Corporate & Partnership Tax - Instructor: Dwight Drake Grade Criteria 100% final No tricks or gimmicks Focus on problems and class discussion Short essay based on fact patterns Can use any none living thing Key is to have you reminder aids well organized Premium on knowing scope of materials well Completely “Ace-Able” by all!

6. Corporate & Partnership Tax - Instructor: Dwight Drake LLM Corporate Tax Instructor: Dwight Drake Federal Tax Sources 2001 2002 2003 2004 2005 2006 2007 Pers. Income 994.3 858.3 793.7 809.0 927.2 1,043.9 1,163.5 Corp. Income 151.1 148.0 131.8 189.4 278.4 353.9 370.2 Social Insurance 694.0 700.8 713.0 733.4 794.1 837.8 869.6 Excise Taxes 66.2 67.0 67.5 69.9 73.1 74.0 65.1 Estate & Gift 28.4 26.5 22.0 24.8 24.8 27.9 26.0 Misc. 57.2 52.5 54.4 53.9 56.4 74.0 65.1 Total Revenue 1,991.2 1,853.2 1,782.3 1,880.3 2,153.9 2,407.3 2,567.7 All in billions

7. Corporate & Partnership Tax - Instructor: Dwight Drake America’s Privately-Owned Businesses 25 Million 99 % of all employers 75% of all new jobs 53% of private workforce 70% of all first jobs 50% of all sales Largest client base for professionals Badly under-serviced by Bar

8. Corporate & Partnership Tax - Instructor: Dwight Drake LLM Corporate Tax Instructor: Dwight Drake The Lawyer’s Role as an Advisor to Business Owners, Professionals and Entrepreneurs Flash Presentation (20 Min. approx) by Dwight Drake Law School Website-Career-Students-Job Resources-Career Tools-Flash Note: It takes a few minutes to load

9. Corporate & Partnership Tax - Instructor: Dwight Drake Types of Privately-Owned Businesses Type A: The Equal Slaves Type B: The Big Fish Type C: The Golfers Type D: The Hybrid Type E: The Family Affair Type F: The Professionals Type H: The Emerging Public Company

10. Corporate & Partnership Tax - Instructor: Dwight Drake Business Entity Forms C Corporations - Subchapter C (§§301-385) S Corporations - Subchapter S (§§1361-1379) Unincorporated Single Owner - Individual Proprietorship General Partnerships – Subchapter K (§§701-777) Limited Partnerships – Subchapter K (§§701-777) Limited Liability Companies - Subchapter K (§§701-777)

11. Corporate & Partnership Tax - Instructor: Dwight Drake LLM Corporate Tax Instructor: Dwight Drake Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com US Businesses Projected Revenues 2007 Corporations $ 21.58 Trillion (84.2%) Sole Proprietorships $ 1.23 Trillion (4.8%) Partnerships $ 1.35 Trillion (5.3%) Limited Liab. Companies $ 1.45 Trillion (5.7%) Total $ 25.61 Trillion

12. Corporate & Partnership Tax - Instructor: Dwight Drake LLM Corporate Tax Instructor: Dwight Drake Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com Duncan and Sandy Smith Plan Daughter Trust Son Trust Daughter Trust GC Trust – 1 GC Trust – 2 GC Trust – 3 GC Trust – 4 GC Trust – 5 GC Trust – 6 Duncan and Sandy Living Trust Personal Residence Trust Family L.L.C. (Growth) Family L.L.C. (New) Dynasty Insurance Trust Charitable Remainder Trust C Corporation Holding S Corp (Parent) Alma Mater Qualified Retirement Plan QSSS Corp (One) QSSS Corp (Two) Income Charitable Deduction Assets Remainder Contributions Distributions Compensation Distributions Home Term Use Assets Cash Remainder Income Units Income, support

13. Corporate & Partnership Tax - Instructor: Dwight Drake LLM Corporate Tax Instructor: Dwight Drake The Big Overriding Traps Sham Transaction Business Purpose Step-Transaction Substance Over Form Section 482

14. Corporate & Partnership Tax - Instructor: Dwight Drake LLM Corporate Tax Instructor: Dwight Drake Trap One: Sham Transaction Business Entity Phony Off Shore Operation Common Owner Service Fees Cash Transfers Note: No Business Purpose

15. Corporate & Partnership Tax - Instructor: Dwight Drake LLM Corporate Tax Instructor: Dwight Drake C Corp Shareholder Trap Two: Form Over Substance 10k for stock 500k loan - Deductible interest - No repayment plan What’s wrong here?

16. Corporate & Partnership Tax - Instructor: Dwight Drake LLM Corporate Tax Instructor: Dwight Drake Trap Three: Step Transaction Business Entity Child of ownerOwner Cash proceeds sale of asset Asset Gift Note: No Business Purpose Cash Gift

17. Corporate & Partnership Tax - Instructor: Dwight Drake LLM Corporate Tax Instructor: Dwight Drake Trap Four: Section 482 C Corp A Common owners C Corp B Bargain sale Imputed Income Imputed Dividend Imputed Contribution

18. Corporate & Partnership Tax - Instructor: Dwight Drake C Corp Tax Impact Income or Loss C Corp Shareholder AShareholder B Corporate Entity Tax Tax On Dividends As Paid

19. Corporate & Partnership Tax - Instructor: Dwight Drake Pass Thru Entity Tax Impact Income or Loss Pass Thru Entity Partnership, LLC, S Corp Owner AOwner B No Entity Tax Tax On Earnings As Recognized

20. Corporate & Partnership Tax - Instructor: Dwight Drake Our Focus Issues – The Forest Taxation of Entity Operations Profits and Losses Entity Formation Tax Issues Taxation of Non-Liquidating Distributions by Entity – Dividends and Partnership Distributions and Allocations Taxation of Transactions Between the Entity and Its Owners Taxation of Entity Liquidations Taxation of Taxable Transfers of the Entity or its Ownership Interests Brief Introduction to Corporate Tax Free Reorganizations