FED TAX OUTLINE – Wiseman 2005
Tax System
self-reportingàexcept W-2 from employer
Return FiledàFine or audited(desk, phone, on-site)
Notice of Deficiency
TP has right to protest; Right to hearing w/appeals officer; Then litigation
2 Forums for Tax Cases
Federal District court
Advantagesàjury and might know judge
Pay on deficiency and then sue for refund
Tax Court
Advantagesàspecialized knowledge of cases
Don’t pay until judgment entered against you
Sources of Tax Law
Tax court and federal court cases
RegulationsàIRS
IRC
Rulings and AnnouncementsàIRS
Technical Advice Memoàfield auditor wants interpretation
General Counsel Memoàwhy regs crafted certain way
GENERAL TAX SCHEME
Gross Income
Minus § 62 deductions
EqualsàAGI
Minus Standard Deduction or Itemized Deductions
Minus personal Exemptions
EqualsàTaxable Income
Times the Tax Rate(from tax table)
EqualsàTax Due
Minus Credits
EqualsàFINAL LIABILITY
GROSS INCOME
§ 61
all income from whatever source derived
if not listed in 15 exceptions then taxable income(TI)
income realized in any formàmoney, property, services
includes any type of compensation for servicesàincluding non-monetary
undeniable accession to wealth, clearly realized, over which TP has complete dominion
accession to wealthàwealthier after transaction than before
not mere return of capital; not loans
Realized
In possession; more than being on paper; converted to non-fluctuating(stocks)
undisputed possession of the TP
2 questions
are you wealthier AND have you realized that wealth
Gross Income Checklist
Any receipt of financial benefit which is NOT
Mere return of capital
Not accompanied by contemporaneously acknowledged obligation to repay
Not excluded by specific statutory provision
Case Holdings
Treasure trove found in piano; reduced to undisputed possessionàGI
Company paying taxes for you; third party pays something for youàGI
Treble damages from judgmentàGI
Bartering/trading and selling for cashàGI
Usually based on the FMV of the work
Can’t charge yourse
f offered for sale to customers in same line of business in which employee is performing and employer incurs no additional cost in providing to employee
132(e)àde minimis fringe
traditional retirement gifts
holiday turkey/ham, gold watch,
daily coffee, copy machine, store clerk discounts
74(c)àemployee achievement awards
§ 101àLIFE INSURANCE
contracting for a death benefit of the person whose life is being measured
face amount of policy is how much the insurance is for
if policy transferred, then person who receives the transfer benefits must INCLUDE in GI
General Rule
any amount paid by reason of death of the insured is excluded
§ 101(a)(1)
except as otherwise provided in 2(d)(g), GI does NOT include any amounts received from a life insurance contract(single sum or in payments) paid by reason of the death of the insurer
