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Tax
Temple University School of Law
Knauer, Nancy J.

USE 2002 outline for income cases

Why does government impose tax?
1. Create revenue
2. Look at how it is raised in tax
3. Transfer resources (almost always money) from the private to the public sector
– take individual money and give to federal government

I. Introduction to What, How, and When we Tax
A. Generally
1. Cesarini v. United States ($ found in piano)
a. Found money in piano
b. Found money is income in the year it is found; The concept of income is broad enough to cover this, since Congress intended to exert the full measure of its taxing power under the 16th Amendment
c. Found money is not explicitly included or excluded as gross income in the 1954 Code
d. §61 is not exhaustive – courts interpret very broadly
e. Policy à there is no reason that someone earning money should be taxed and one who finds the money should not be taxed (horizontal equity).
2. Glenshaw Glass Test
a. a net accession to wealth – an increase in wealth without a corresponding duty to repay.
b. Clearly realized – ex. increase in house value is not taxable until sold
c. exercised dominion and control over item
3. IRC § 1(a) – Married Individuals Filing Joint Returns and Surviving Spouses

If Taxable Income is

The Tax is

Not Over $14,300

10%

$58,100

15%

$117,250

25%

$178,650

28%

$319,100

33%

Over $319,100

35%

4. IRC § 1(b) – Head of Households

If Taxable Income is

The Tax is

Not Over $10,200

10%

$38,900

15%

$100,500

25%

$162,700

28%

$319,100

33%

Over $319,100

35%

5. IRC § 1(c) – Unmarried Individuals

If Taxable Income is

The Tax is

Not Over $7,150

10%

$29,050

15%

$70,350

25%

damages under the antitrust laws and exemplary damages for fraud are gross income. Another person’s payment of the taxpayer’s income taxes constitutes gross income to the taxpayer unless excluded by law. Illegal gains constitute gross income. Treasure trove, to the extent of its value in US currency, constitutes gross income for the taxable year in which it is reduced to undisputed possession.
B. Other Windfalls – Unsolicited Samples
1. Haverly v. United States (principal donates books and gets taxed)
Facts: Professor receives unsolicited sample copies of textbooks. Professor donates
books and writes off the charitable deduction for $400 without taking them into income.
a. When a tax deduction is taken for the donation of unsoloicited samples, the value of the samples received must be included in the TP’s gross income
b. Unsolicited samples raises the question of whether the taxpayer had an intent to accept the property or exercised “complete dominion” over it; by taking the deduction, the taxpayer treated it as income
c. § 61: Gross income means from whatever source derived – In view of the comprehensive language seating the conception of income and the SC’s broad interpretation of Congress’s intent to use the full measure of its “taxing power” and “to tax all gains except those specifically exempted”
II. What is Income – Detailed Study
In general