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Seton Hall Unversity School of Law
Wolfe, Steve

             I.      Introduction:
a.       Purpose of Taxation: Revenue; Inhibit/Stimulate Behavior
b.      History: Income tax introduced in early 20th c.; challenged on constitutionality grounds; 16th Am results; 1st Convocation 1939, all of the revenue statutes codified; Internal revenue laws revised in 1954; Laws revised again in 1986 (current form).
c.       Sources of Tax Law
                                                               i.      Internal Revenue Code of 1986
                                                             ii.      Treasury Dept.
1.      Income Tax Regulations
a.       Promulgated in accordance with the Fed. Rules of Admin. Procedure
b.      Interpretive regs promulgated under the general authority to interpret the code as necessary for proper administration of statute (§7872(h))
2.      Cumulative Bulletin
a.       Rulings
                                                                                                                                       i.      Issued in response to requests by taxpayers or IRS personnel. 
                                                                                                                                     ii.      Formal rulings may be relied upon by other taxpayers.
                                                                                                                                    iii.      Informal private letter rulings issued to taxpayers who want them
1.      Rarely pursued; expensive and better not to give IRS info
2.      Rulings are released, but identity kept secret; may NOT be relied upon as precedent. 
b.      TAMS
c.       AOD (Advice on Decisions): IRS says whether it agrees with a decision or will contest it in the future with a different interpretation
                                                            iii.      Judicial Branch
1.      Tax Court
a.       Jurisdiction – any deficiency à so you can pay off most and leave only a little – little interest will accumulate while you go to court
b.      Non-jury. Chief Judge decides if the whole court will hear it.
2.      District Court
a.       Refund Jurisdiction – must pay first to get into the court
b.      Jury
3.      U.S. Court of Federal Claims
a.       Refund Jurisdiction – must pay first to get into the court
b.      Mostly trademark and patent cases
c.       Non-jury
4.      Appeals
a.       Tax Ct. & District Ct à Circuit Court of Appeals
b.      U.S. Ct. of Fed. Claims à Ct. Appeals Fed. Dist.
c.       If still disagreement, can be heard by Supreme Ct (rare)
d.      Alternative to Income Tax: Consumption Tax, Sales Tax, Flat Tax, Graduated Tax? Problem: Must still raise $1 trillion.
          II.      Gross Income §61:
a.       Gross income includes the receipt of any financial benefit which is: (1) not a mere return of capital; (2) not accompanied by a contemporaneously acknowledged obligation to repay; and (3) not excluded by a specific statutory provision.
b.      Imputed Income: monetary value of goods and services that someone produces and consumes within the family unit, as well as monetary value of using property that someone owns. 
                                                               i.      Imputed Income ≠ Taxable Income: Income tax on imputed income difficult for taxpayers to comply with, and difficult for IRS to enforce. 
                                                             ii.      Rent from property that is owned is not taxable (Helvering v. Ind. Life Ins. Co.)
c.       Accretion in Value: Accumulations of wealth during a particular period of time. Not included in Income Tax concept for two reasons: (1) administrative difficulties: hard to annually determine the value of all of a taxpayer’s property; (2) liquidity problem (no $ yet because no sale)
                                                               i.      Any appreciation in the value of property must be realized before it is included in gross income. (Comm’r v. Glenshaw Glass). 
d.      Income Computation:

                                                v.      Standard Deduction §63:
1.      Taxpayer can take a deduction in the amount of standard deduction in lieu of listing all of her deductions for state and local taxes, interest, charitable contributions, and other non-§62 deductions (i.e. itemized deductions). 
2.      No substantiation needed and IRS need not scrutinize returns that use standard deductions as closely as those that use itemized deductions.
3.      Subtracted from a taxpayer’s AGI to arrive at taxable income subject to tax.
4.      Amounts (for class purposes): $3k per person (married, filing separately OR unmarried), $6k (married, filing joint return OR surviving spouse), and $4.4k (head of household)
a.       Note (for outside class): Standard deductions are adjusted annually with reference to fluctuations in the cost-of-living. §63(c)(3) and (f).
5.      Additional Standard Deduction for Aged and Blind:
a.       Additional standard deduction is added to the amount of the basic standard deduction in computing the standard deduction amount for a taxpayer who has: (1) attained the age of 65; or (2) who is blind at the end of the taxable year. §63(c)(3) and (f).
b.      Taxpayer entitled to a personal exemption for her spouse may claim additional standard deductions if her spouse is age 65 or blind.
c.       Amounts: $600; $750 if taxpayer is not married and is not a surviving spouse.
                                                                                                                                       i.      Note (for outside class): adjusted annually for cost of living.