Income Taxation Outline

 
BASIC TAX OUTLINE
Fall ‘09
Professor Todres
Text: Fundamentals of Federal Income Taxation: Cases and Materials by Freeland, Lathrope, Lind and Stephens, 15th Ed.
 
N.B.: Focusing mainly on individuals and dealing exclusively with Federal taxes
 
BACKGROUND
o   Some Sources:
§ Tax Reporter, Published by CCH
·         Internal Revenue Code, Regulations, Administrative Materials, and annotations of relevant case law and legislative history.
·         Also has some “special volumes ” (places where reporter has done the work for you)
·         Updated weekly
§ Treatises: some for every topic; some main ones:
·         Martins: The Law on Federal Income Taxation
o   Traces development of code § by §
·         Ratkin & Johnson: Federal Income Gift & Estate Taxation
·         Bickers & Lokken: Federal taxation of Income, Estates & Gifts
·         The Tax Coordinator, by Research Institute of America
o   (tends to, slightly, turn the gray into black and white)
§ Tax Management Portfolios
·         Detailed outline of very specific area, written and laid out by expert in the field
·         Can often find forms here
§ Law Reviews on Tax
§ Tax Notes: weekly publication
·         The premier are for developments in tax
o   GENERAL STRUCTURE OF INCOME TAX
§ Gross Income
·         Less deductions (§ 62)
o   Called “above the line deductions; as they are used to arrive at AGI {adjusted gross income}
·         Less:
o   Greater of:
§ Itemized Deductions or
§ Standard Deduction AND
o   Personal Exemptions
·         [Arrive at:] Taxable Income
o   Multiply by appropriate rate
·         [Arrive at:] Tentative Tax
·         + AMT
·         – Tax Credits
·         = WHAT YOU PAY
§ [Come back to this at end of everything. It will make more sense] o   The Source of Tax Law: In order of Authority
§ 1. Constitution
·         The 16th Amend allows for an income tax
o   (At this point in our history, there are (almost) no Constitutional issues with the tax system. Not to say of course that Congress could not pass a tax that would be unconstitutional.)
§ 2. Title 26 of the U.S. Code: The Internal Revenue Code (of 1986)
·         This is the current version because that was the last major overhaul. Of course, it is continuously updated and changed.
§ 3. Administrative Materials issued by the Treasury
·         Regulations: in theory, subservient to the statute. In practice, however, courts will bend over backwards to rule in accordance with the regs.
o   Legislative Re-Enactment Doctrine: when Congress, in modifying or analyzing area of the code relevant to a given reg does not object to the reg it can give that reg the force of law.
·         Rulings:
o   Public: Promulgated for the public, and valid for the public
o   Private: written only for an individual, binding only on that individual
§ Even if whole world is aware of the ruling
§ Can be persuasive authority, perhaps
o   Citing to Revenue Rulings:
§ Rev. Rul. yy – #; until: Rev. Rul. 1999 – #
·         (in 1999, in contemplation of Y2K, switched to four digit year indicator)
·         Acquiescence: when IRS loses a case, it can either acquiesce in the ruling, or issue an announcement proclaiming its disagreement and intent to continue to argue
o   These are not binding
§ 4. Case Law
 
 
TAX
 
GROSS INCOME
·         § 61: Gross Income Defined
o   “all income from whatever source derived”
§ List of some specific follows.
§ Source of income need to be cash to be included
o   Gross income is defined extremely broadly; in fact, it is c