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A. BASIC RATE STRUCTURE

1. Tax rate schedules
2. Standard deduction..
3. Personal exemption
4. Adjustments for inflation
5. Two-earner deduction

6. Income averaging
B. EARNED INCOME CREDIT
C. EXCLUSIONS FROM INCOME.

1. Unemployment compensation benefits
2. Prizes and awards.

3. Scholarships and fellowships
D. DEDUCTIONS FOR PERSONAL EXPENDITURES.

1. Disallowance of itemized deduction for State

and local sales taxes........
2. Increased floor for itemized deduction for med-

ical expenses.....
3. Repeal of deduction for certain adoption ex-

penses....
4. Deductibility of mortgage interest and taxes

allocable to tax-free allowances for ministers

and military personnel .......
E. EXPENSES FOR BUSINESS OR INVESTMENT..

1. Limitations on deductions for meals, travel,

and entertainment ......
2. Floor on deductibility of miscellaneous item-

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52

53 55

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ized deductions; modifications to certain em

ployee business expense deductions
3. Changes in treatment of hobby losses....
4. Changes in restrictions on deductions for busi-

ness use of home.....
F. REPEAL OF POLITICAL CONTRIBUTIONS Tax CREDIT ...

76 82

83 88

(v)

89

89 99 110 110 127 128

128

Title II. Capital Cost Provisions.......

A. DEPRECIATION; REGULAR INVESTMENT TAX CREDIT;
FINANCE LEASES...

1. Depreciation
2. Regular investment tax credit..

3. Finance leases..........
B. LIMITATION ON GENERAL BUSINESS CREDIT.
C. RESEARCH AND DEVELOPMENT

1. Tax credit for increasing research expendi

tures; university basic research credit ........ 2. Augmented charitable deduction for certain

donations of scientific equipment.

3. Tax credit for orphan drug clinical testing
D. RAPID AMORTIZATION PROVISIONS............

1. Trademark and trade name expeditures ........
2. Qualified railroad grading and tunnel bores ....
3. Bus operating authorities; freight forwarders....
4. Removal of architectural and transportation

barriers to the handicapped and elderly.
E. REAL ESTATE PROVISIONS ...

1. Tax credit for rehabilitation expenditures..

2. Tax credit for low-income rental housing F. MERCHANT MARINE CAPITAL CONSTRUCTION FUND

140 141 143 143 144 145

147 148 148 152 174

178

178 181 184 186

187

Title III. Capital Gains and Losses.....

A. INDIVIDUAL CAPITAL GAINS AND LOSSES
B. CORPORATE CAPITAL GAINS
C. INCENTIVE STOCK OPTIONS

D. Tax STRADDLES ..........
Title IV. Agriculture, Natural Resources, and Energy
A. AGRICULTURE PROVISIONS ....

1. Special expensing provisions: soil and water

conservation; clearing land........
2. Dispositions of converted wetlands and highly

erodible croplands .........
3. Prepayments of farming expenses
4. Discharge of indebtedness income for certain

farmers..
B. OIL, GAS, GEOTHERMAL, AND HARD MINERAL PROPER-

187

187

188 190

193

TIES

195

195 199

199

1. Intangible drilling costs and mining explora

tion and development costs........
2. Modification of percentage depletion rules
a. Denial of percentage depletion for lease

bonuses and advance royalties.
b. Excess percentage depletion for coal and

iron ore...
3. Gain from disposition of interests in oil, gas,

geothermal, or other mineral properties.
C. ENERGY-RELATED Tax CREDITS AND OTHER INCENTIVES.

1. Business energy tax credits....

200

202

...........

204

2. Neat alcohol fuels
3. Taxicab fuels tax exemption
4. Duty on imported alcohol fuels

Page 206 206 207

209

Title V. Tax Shelters; Interest Expense.
A. LIMITATIONS ON LOSSES AND CREDITS FROM PASSIVE
ACTIVITIES

1. Overview .....
2. Treatment of losses and credits...
3. Treatment of portfolio income.
4. Material participation
5. Definition of activity.
6. Rental activity ....

7. Working interest in oil and gas property ....
B. EXTENSION OF AT-RISK RULES TO REAL ESTATE ACTIVI-

TIES.
C. INTEREST DEDUCTION LIMITATIONS.

209 215 222 231 235 245 248 250

255 262

Title VI. Corporate Taxation..

271

271 274 276 277

280

288

328

A. CORPORATE TAX RATES.........
B. CORPORATE DIVIDENDS RECEIVED DEDUCTION
C. DIVIDEND EXCLUSION FOR INDIVIDUALS...........
D. STOCK REDEMPTION PAYMENTS ....
E. EXTRAORDINARY DIVIDENDS RECEIVED BY CORPORATE

SHAREHOLDERS...
F. SPECIAL LIMITATIONS ON NET OPERATING Loss AND

OTHER CARRYFORWARDS.
G. RECOGNITION OF GAIN OR Loss ON LIQUIDATING SALES

AND DISTRIBUTIONS OF PROPERTY (General Utilities)..
H. ALLOCATION OF PURCHASE PRICE IN CERTAIN SALES OF

ASSETS .....
I. RELATED PARTY SALES
J. AMORTIZABLE BOND PREMIUM
K. CERTAIN ENTITY Not TAXED AS A CORPORATION.
L. COOPERATIVE HOUSING CORPORATIONS..
M. DEFINITION OF PERSONAL HOLDING COMPANY INCOME ..
N. REGULATED INVESTMENT COMPANIES....
O. REAL ESTATE INVESTMENT TRUSTS ........
P. MORTGAGE-BACKED SECURITIES

355 361 363 365 366 371 375 384 402

Title VII. Minimum Tax Provisions ...

429

.........

429 436

439

MINIMUM TAX ON CORPORATIONS AND INDIVIDUALS

1. Overview ......
2. Preferences and adjustments applying to both

individuals and corporations.
3. Additional preferences and adjustments (other

than limitations on itemized deductions) ap

plying to individuals .........
4. Business untaxed reported profits and adjusted

current earnings
5. Additional preferences and adjustments apply-

ing to corporations

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448

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462 463 468

470 471 471

474

474

6. Alternative minimum tax itemized deductions

for individuals .........
7. Tax credits......
8. Net operating losses
9. Limitation on the use of foreign tax credits,

net operating losses, and investment tax cred

its.
10. Regular tax elections...

11. Other rules ....
Title VIII. Accounting Provisions...
A. LIMITATIONS ON THE USE OF THE CASH METHOD OF

ACCOUNTING
B. SIMPLIFIED DOLLAR VALUE LIFO METHOD FOR CERTAIN

SMALL BUSINESSES
C. INSTALLMENT SALES..
D. CAPITALIZATION RULES FOR INVENTORY, CONSTRUCTION,

AND DEVELOPMENT COSTS
E. LONG-TERM CONTRACTS
F. RESERVES FOR BAD DEBTS.
G. TAXABLE YEARS OF PARTNERSHIPS, S CORPORATIONS,

AND PERSONAL SERVICE CORPORATIONS..
H. SPECIAL TREATMENT OF CERTAIN ITEMS.

1. Qualified discount coupons.....
2. Income attributable to utility services...
3. Contributions in aid of construction.......
4. Cancellation of indebtedness for solvent tax-

payers.........
Title IX. Financial Institutions.

481 488

501 524 531

533 540 540 542 544

547

549

549 549 553

558

567

569

572

.........

A. RESERVES FOR BAD DEBTS

1. Commercial banks

2. Thrift institutions
B. INTEREST ON DEBT USED TO PURCHASE OR CARRY TAX-

EXEMPT OBLIGATIONS.
C. SPECIAL RULES FOR NET OPERATING LOSSES OF FINAN-

CIAL INSTITUTIONS
D. REPEAL OF SPECIAL RULES FOR REORGANIZATIONS OF

FINANCIALLY TROUBLED THRIFT INSTITUTIONS............
E. TREATMENT OF LOSSES AND INTEREST ON DEPOSITS IN

INSOLVENT FINANCIAL INSTITUTIONS
Title X. Insurance Products and Companies....
A. INSURANCE POLICYHOLDERS

1. Interest on installment payments of life insur

ance proceeds.........
2. Treatment of structured settlement agree-

ments
3. Life insurance policyholder loans

4. Deduction for nonbusiness casualty losses ......
B. LIFE INSURANCE COMPANIES

1. Special life insurance company deduction..........

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575

575

576 578 580 582 582

Page

583

592

594

594

598 600

618

619

621

622

624

624 624 633

2. Tax-exempt organizations engaged in insur

ance activities.........
3. Operations loss deduction of insolvent compa-

nies
C. PROPERTY AND CASUALTY INSURANCE COMPANY TAX-
ATION......
1. Inclusion in income of 20 percent of unearned

premium reserve............
2. Treatment of certain dividends and tax-exempt

interest
3. Loss reserves.
4. Protection against loss account for mutual

companies........
5. Special exemptions, rates, and deductions of

small mutual companies; combination of

Parts II and III of subchapter L ........
6. Study of treatment of property and casualty

insurance companies....
7. Physicians' and surgeons' mutual protection

associations ..........
Title XI. Pensions and Deferred Compensation; Employee

Benefits; Employee Stock Ownership Plans (ESOPs).....
A. LIMITATIONS ON TREATMENT OF TAX-FAVORED SAVINGS

1. Individual retirement arrangements (IRAS) ......
2. Qualified cash or deferred arrangements
3. Nondiscrimination requirements for employer

matching contributions and employee contri

butions .....
4. Unfunded deferred compensation arrange-

ments of State and local governments
5. Deferred annuity contracts ....
6. Elective contributions under tax-sheltered an-

nuities ..........
7. Special rules for simplified employee pensions.
8. Deductible contributions permitted under sec-

tion 501(c)(18) plans .......
B. NONDISCRIMINATION REQUIREMENTS

1. Minimum coverage requirements
2. Minimum participation rule
3. Vesting standards....
4. Application of nondiscrimination rules to inte-

grated plans ....
5. Benefits treated as accruing ratably for pur-

645

652 657

661 663

667 669 669 682 687

690

poses of determining whether plan is top

heavy....
6. Modification of rules for benefit forfeitures..

7. Definition of highly compensated employees..... C. TREATMENT OF DISTRIBUTIONS...

1. Uniform minimum distribution rules
2. Uniform additional income tax for early distri-

butions ........
3. Taxation of distributions.....

700 702 703 708 708

712 719

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