Federal Income Tax Outline

Federal Income Taxation Outline

Gross Income:

Definition of Gross income:
o §61
§ “gross income means all income from whatever source derived.”
· Including but not limited to:
o 1) compensation for services, including fees, commissions, fringe benefits, and similar items
o 2) gross income derived from business
o 3) gains derived from dealings in property
o 4) interest
o 5) rent
o 6) royalties
o 7) dividends
o 8) alimony and separate maintenance payments
o 9) annuities
o 10) income from life insurance and endowment contracts
o 11) pensions
o 12) income from discharge of indebtedness
o 13) distributive share of partnership income
-Treasury Regulation 1.61-1a: All income from whatever source derived, unless excluded by law. Gross income includes income realized in any form, whether money, property, or services
· TR §1.61-2(d)(1)
o Fmv of both services and property are income
o (d) (2)(i)
§ Basis of property
· TR §1.61-14 (a)
o Punitive damages are income

Income is clearly realized when found
Cesarini v US:
-Bought piano for $15, found a bunch of money in it. When is this considered income, when he found it, or when he bought piano. (Income is clearly realized when he found it.)

Gross income from Glenshaw:
1) undeniable accessions to wealth
2) clearly realized
3) over which the taxpayers have complete dominion

Whatever taxpayers do for themselves is not income. (Helvering case)

Gross Income exception: Gifts and Inheritances

· Property acquired general rule
o IRC §102 (a)
· General rule: “gross income does not include the value of property acquired by gift, bequest, devise, or inheritance.
-But if you give something that will make more income, that extra income is taxable (stocks).

Rule for gift: Detached and disinterested