Table of Contents
CHAPTER 1 Introduction1-1
| The Internet | 1-2 |
| Investment Clubs | 1-3 |
| A Map for Financial Independence | 1-3 |
| Mapping Steps | 1-4 |
| Identifying Your Goals | 1-5 |
| Investment Purposes | 1-6 |
| Investment Goals | 1-12 |
| Find Your Place in Time | 1-13 |
| "Know Thy Investment Self" | 1-14 |
| Investment Vehicles & Entities | 1-14 |
| Developing a Financial Plan | 1-14 |
| Implementing the Plan | 1-15 |
| Cash Management | 1-15 |
| Savings | 1-17 |
| Asset Types | 1-20 |
| Life Insurance | 1-32 |
| Social Security | 1-40 |
| Commitment | 1-42 |
| Investment Selection & Evaluation Strategies | 1-43 |
| Active Strategies | 1-43 |
| Passive Strategies | 1-47 |
CHAPTER 2 Entities & Title2-1
| Basic Entity Formats | 2-1 |
| Individual & Sole Proprietorship | 2-2 |
| Corporate | 2-4 |
| Trusts | 2-22 |
| Co-Tenancy | 2-23 |
| Partnership | 2-25 |
| Limited Liability Company | 2-35 |
| Retirement Plan | 2-38 |
| Custodianship | 2-42 |
| Estate | 2-42 |
CHAPTER 3 Deferral3-1
| Section 1031 "Like-Kind" Exchanges | 3-2 |
| Exchange Advantage | 3-2 |
| Importance of Deferral | 3-2 |
| Three Elements | 3-3 |
| Related Party Exchanges | 3-11 |
| Foreign Real Property Exchanges | 3-13 |
| Qualified §1031 Exchange of Personal Property Repealed | 3-16 |
| Delayed (Deferred) Exchange Regulations | 3-21 |
| Retirement Plans | 3-35 |
| Designing Your Retirement | 3-35 |
| Sources of Retirement Income | 3-36 |
| Installment Sales | 3-47 |
| Requirements | 3-47 |
| Formula | 3-48 |
| Mortgage in Excess of Basis | 3-48 |
| Recapture | 3-50 |
| Dealers | 3-50 |
| At-Risk Rule | 3-50 |
| Deferred Compensation | 3-51 |
| Options | 3-51 |
CHAPTER 4 Reduction4-1
| Tax Credits | 4-1 |
| Work Opportunity Tax Credit (WOTC) Expired– §51 | 4-1 |
| Research Tax Credit - §41 | 4-3 |
| Rehabilitation Tax Credit - §47 | 4-4 |
| Low Income Housing Credit - §42 | 4-5 |
| Child & Dependent Care Credit - §21 | 4-7 |
| Estimated Taxes | 4-8 |
| General Rule | 4-8 |
| Cash-Saving Strategies | 4-9 |
| Underpayment Cautions | 4-9 |
| Tax Refund Trap | 4-10 |
| Basic Deductions | 4-10 |
| Interest | 4-10 |
| Automobile Deductions | 4-15 |
| Commuting - Local Business Transportation | 4-19 |
| Regular/Irregular Rule - R.R. 90-23 | 4-19 |
| Temporary Work Outside Metropolitan Area - R. R. 99-7 | 4-21 |
| Business Entertainment | 4-23 |
| Prior to 2018 | 4-24 |
| Statutory Exceptions - §274(e) | 4-24 |
| Depreciation & Cost Recovery - §167 & §168 | 4-26 |
| Personal Property | 4-26 |
| Net Operating Losses - §172 | 4-31 |
| Creation of an NOL | 4-31 |
| Individual NOLs | 4-31 |
| Corporate NOLs | 4-32 |
| Further Limitations | 4-32 |
| Tax Breaks for Nonitemizers | 4-32 |
| Adjustments | 4-33 |
| Credits | 4-33 |
| Amended Returns | 4-33 |
| Audit Avoidance | 4-33 |
| Safest Amendments | 4-34 |
| Not-So-Safe Amendments | 4-34 |
CHAPTER 5 Income Splitting5-1
| Using Progressive Tax Rates | 5-2 |
| Splitting Income Among Group Members | 5-2 |
| Wealth Allocation | 5-2 |
| Major Formats | 5-2 |
| Unincorporated Business | 5-4 |
| Deductible Business Expenses | 5-4 |
| Home-Office Deduction | 5-4 |
| Retirement Plans | 5-6 |
| Hiring Your Children | 5-7 |
| Hiring Your Spouse | 5-7 |
| Travel Expenses | 5-7 |
| Casualty Losses | 5-7 |
| Bad Debts | 5-7 |
| Self-Employment Tax | 5-7 |
| "C" or Regular Corporation | 5-8 |
| Planning Considerations | 5-10 |
| When to Incorporate | 5-10 |
| Formation | 5-11 |
| Repeal of the "General Utilities" Doctrine | 5-12 |
| "S" Corporation | 5-13 |
| Single Taxation | 5-13 |
| Planning Considerations | 5-14 |
| Tax Advantages | 5-14 |
| Formation | 5-15 |
| Corporations That Qualify | 5-15 |
| Income-Splitting | 5-16 |
| Estimated Tax Payments | 5-17 |
| Partnership | 5-19 |
| Partner's Distributive Share | 5-19 |
| Partnership Return | 5-19 |
| Schedule K-1 (Form 1065) | 5-20 |
| Family Partnerships | 5-20 |
| Gift of Capital Interest | 5-21 |
| Custodianship & Children | 5-22 |
| Taxation | 5-22 |
| Child Care & Education | 5-23 |
| Gifts | 5-28 |
| Gifts by Check | 5-28 |
| Interest Free Loans | 5-29 |
| De Minimis Exception | 5-30 |
| Special Rule for Gift Loans | 5-30 |
CHAPTER 6 Elimination6-1
| $500,000 Home Sale Exclusion - §121 | 6-1 |
| Two-Year Ownership & Use Requirements | 6-2 |
| Tacking of Prior Holding Period | 6-2 |
| Vacant Land | 6-2 |
| Mixed Business & Residence Use | 6-3 |
| Prorata Exception | 6-3 |
| Use of Old §1034 & §121 - Gone Long Ago | 6-5 |
| Limitations on Exclusion | 6-6 |
| Renting to Parents | 6-6 |
| Municipal Bonds | 6-7 |
| Tax-Exempt Interest on Qualified State or Local Obligations | 6-7 |
| Private Activity Bonds | 6-8 |
| Divorce & Separation Settlements | 6-8 |
| Pre-2019 Alimony | 6-8 |
| Child Support | 6-9 |
| Property Division | 6-9 |
| Dependency Exemption Eliminated | 6-9 |
| Gifts & Inheritances | 6-9 |
| Basis of Gift | 6-10 |
| Holding Period | 6-10 |
| Income from Property Given to a Child | 6-10 |
| Life Insurance | 6-11 |
| Proceeds Not Received in Installments | 6-11 |
| Proceeds Received in Installments | 6-11 |
| Fringe Benefits | 6-12 |
| Prizes & Awards - §74(b) | 6-12 |
| Group Life Insurance Premiums - §79 | 6-13 |
| Accident and Health Plans - §106 & §105 | 6-14 |
| Meals & Lodging - §119 | 6-14 |
| Cafeteria Plans - §125 | 6-14 |
| Educational Assistance Program - §127 | 6-15 |
| Dependent Care Assistance - §129 | 6-15 |
| Section 132 | 6-16 |
| Taxation & Valuation of Benefits | 6-19 |
| Valuation Provisions | 6-19 |
| Eating Facilities | 6-20 |
| Meal Subsidy Rule | 6-20 |
| ERISA Compliance | 6-21 |
| Employee Expense Reimbursement | 6-22 |
| Unreimbursed Employee Expenses | 6-22 |
| Reimbursed Employee Expenses | 6-22 |
| Fixed & Variable Rate (FAVR) Allowances - R.P. 90-34 | 6-33 |
| Social Security | 6-35 |
| Taxation | 6-35 |
| Earnings Record | 6-36 |
| Payments Exempt from Social Security | 6-36 |
| Social Security Checkup | 6-36 |
| Answers & Explanations | 6-39 |
Glossary6-68
Index of Keywords & Phrases6-69
Course Details
Author: Danny Santucci, J.D.
Danny earned his Bachelor of Arts in Political Science from the University of California at Irvine in 1969. He received his Juris Doctorate from Boalt Hall School of Law, University of California at Berkeley in 1972, at which time he began practice as a tax attorney in Southern California.
His legal career was initiated with the business and litigation firm of Edwards, Edwards and Ashton. Later he joined the Century City entertainment firm of Bushkin, Gaims, Gaines & Jonas working for many well-known celebrities. In 1980, Danny established the law firm of Santucci, Potter and Leanders, in Irvine, California. With increasing lecture and writing commitments, Danny went into sole practice in 1995. His practice emphasizes business taxation, real estate law and estate planning.
Danny has been an officer and active member in various organizations including the Glendale Bar Association, Century City Bar Association, Orange County and Los Angeles County Bar Associations, California State Bar Association, Toastmasters and Lions Club. He also avidly supports the American Association for the Advancement of Science. He has been admitted to practice before all California and federal courts including the United States Tax Court and the United States Supreme Court.
Serving as a lecturer for the Continuing Education of the Bar of California, Golden Gate University, and numerous state C.P.A. societies, Danny teaches a variety of tax, business and real estate courses. Danny has been in demand all across the country as a speaker for all levels of professional and civic organizations and numerous major seminar circuits. Danny spoke to over 2,000 people per month and traveled more than 150,000 miles annually.
In 2015, he withdrew from the lecture circuit to devote himself to tax research and writing. The author of numerous texts, he is listed in "Who’s Who in Creative Real Estate" and is admitted to the American Exchangor’s Hall of Fame.
Publication/Revision Date: 10/22/2026
Course Exam Questions (online): 80 (multiple-choice)
Program Delivery Method: Self-Study (NASBA QAS Self-Study)
Available Formats of Course Text: PDF or PDF plus printed copy sent in the mail
Course Level, Prerequisites, and Advance Preparation Requirements
| License | Course Level | Prerequisites | Advance Preparation Requirements |
|---|
| CPA | Overview | None | None |
| EA/OTRP | Basic | None | None |
Sponsor ID Numbers
National Registry of CPE Sponsors ID: 107615
IRS Qualified Sponsor ID: FWKKO — Course ID: FWKKO-T-00806-26-S
State CPA Board Sponsor ID Numbers (where applicable)
Florida Division of Certified Public Accounting: 0004761
Hawaii Board of Public Accountancy: 14003
New York State Board for Public Accountancy: 002146
Ohio Accountancy Board: CPE .51 PSR
Pennsylvania State Board of Accountancy: PX178025
Texas State Board of Public Accountancy: 009349
Learning Objectives
Chapter 1: Introduction
Major Topics
- The Internet
- Mapping for financial independence
- Investment purposes
- Cash management
- Savings
- Physical assets
- Financial assets
- Life insurance
- Social Security
- Investment selection & evaluation strategies
Learning Objectives
As a result of studying the course material, you should be able to meet the objectives listed below:
- Specify steps in the mapping process to prepare for financial independence, identify retirement myths, recognize investment planning goals and purposes, and identify resource allocation, including necessary generational changes.
- Determine how to manage income to generate cash and acquire assets, differentiate physical and financial assets including stocks and bond types, and recognize the major types of life insurance including their use as financial planning tools.
- Identify active and passive investment acquisition strategies.
After studying the materials in Chapter 1, answer the exam questions 1 to 20.
Chapter 2: Entities & Title
Major Topics
- Individual ownership & sole proprietorships
- Corporations
- Trusts holding title & business trusts
- Co-tenancy taxation, percentage interests, & partition
- Partnership taxation & recapitalization
- Family partnerships
- Limited liability companies
- Retirement plans
- Custodianship
- Estate
Learning Objectives
As a result of studying the course material, you should be able to meet the objectives listed below:
- Identify tax and legal title formats and the distinctions among these entity formats, recognizing co-tenancy, partnerships, custodianships, retirement plans, and estates, and determine their advantages and disadvantages in holding assets and dealing with income.
After studying the materials in Chapter 2, answer the exam questions 21 to 28.
Chapter 3: Deferral
Major Topics
- Elements of like-kind exchanges
- Related party exchanges
- Multiple property exchanges
- Delayed (deferred) exchange regulations
- Actual & constructive receipt rule
- Qualified contribution plans
- Tax-deferred annuities
- Installment sales
- At-risk rule
- Deferred compensation and options
Learning Objectives
As a result of studying the course material, you should be able to meet the objectives listed below:
- Identify the benefits of tax deferral and recall the tax deferral advantage under §1031, listing its elements.
- Specify the related party §1031 restrictions, identifying prohibited parties or entities, disallowance of personal property and partnership exchanges.
Chapter 4: Reduction
Major Topics
- Work Opportunity Credit & Rehabilitation Credit
- Low Income Housing Credit & Child & Dependent Care Credit
- Estimated taxes
- Interest
- Automobile deductions
- Remaining business entertainment deductions
- Depreciation & cost recovery
- Net operating losses
- Tax breaks for nonitemizers
- Amended returns
Learning Objectives
As a result of studying the course material, you should be able to meet the objectives listed below:
- Identify tax credits specifying qualified computational expenses, limitations, and restrictions.
- Recognize the types of deductible and nondeductible interest, including personal, investment, and prepaid interest.
- Identify business vehicle operating costs using (or switching between) the actual cost method or the standard mileage rate.
- Recall the statutory exceptions to the disallowance of entertainment deductions and recognize the application of R.R. 90-23 and R.R. 99-7 to the deduction of transportation costs to a temporary work location.
- Determine the requirements of business asset expensing under §179 and identify sources of §172 net operating losses (NOLs), recognizing carryback and carryover rules.
After studying the materials in Chapter 4, answer the exam questions 44 to 59.
Chapter 5: Income Splitting
Major Topics
- Using progressive tax rates
- Deductible business expenses
- Home-office deduction
- C or regular corporations
- S corporations
- Family partnerships
- Childcare & education
- Gifts
- Interest-free loans
Learning Objectives
As a result of studying the course material, you should be able to meet the objectives listed below:
- Recognize formats for income splitting, determine the restricted tax treatment of employee business expenses, and cite changes made to home office deduction under TRA '97.
- Identify the tax treatment of personal and business casualty losses and bad debts.
- Determine the uses and tax characteristics of regular and S corporations by recognizing the taxation of these entities, including their ability to split income.
- Recognize the use of partnerships to split income among partners and reduce estate taxes.
- Identify the use of custodianship to split income, specifying "kiddie" tax considerations and recognize good investments for children, including bonds.
After studying the materials in Chapter 5, answer the exam questions 60 to 72.
Chapter 6
Major Topics
- $500,000 home sale exclusion
- Municipal bonds
- Divorce & separation settlements
- Gifts & inheritances
- Life insurance
- Fringe benefits
- Taxation & valuation of benefits
- Employee expense reimbursement & reporting
- Fixed & variable rate allowances
- Social security
Learning Objectives
As a result of studying the course material, you should be able to meet the objectives listed below:
- Recognize the requirements of the current §121 home sale exclusion, citing its differences with prior tax law and specify the tax elimination aspects of interfamily transactions such as divorce and gifts.
- Recognize employer deductions as a means to increase tax-free incentive-based compensation for employees using fringe benefits under §132 and employer-paid accident & health coverage.
- Identify how to comply with ERISA plan requirements, and specify the proper reporting of reimbursed and unreimbursed business expenses under accountable and nonaccountable plans.
After studying the materials in Chapter 6, answer the exam questions 73 to 80.
