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Tax
University of Minnesota Law School
Monahan, Amy B.

 
Tax I Monahan Fall 2015
 
Introduction
1.      Fundamental goals
A.     Fairness
B.     Administrative simplicity
C.     Economic efficiency
2.      Haig-Simons definition: Income = Consumption + Change in Wealth
3.      Mayo Foundation case. (give high deference to IRS)
4.      Income Tax Liability
                                       Gross Income (§ 61)
LESS                            Above The Line Deductions (§ 62)
EQUALS                     ADJUSTED GROSS INCOME (AGI, §62)
LESS                            ITEMIZED DEDUCTIONS (§§ 161-222)
                                                                                    OR
                                    STANDARD DEDUCTION (§62)
LESS                            PERSONAL EXEMPTIONS (§151)
EQUALS                     TAXABLE INCOME (§ 63)
RATES APPLIED TO
TAXABLE INCOME (§1)
DETERMINE               TAX LIABILITY
LESS                            CREDITS (§§ 21-53)
 
Gross Income
1.      §61(a). except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items:
A.     Cash
B.     Property
C.     Services and other intangibles.
Treas. Reg. 1.61-2(d)(1). If services are paid for other than in money, the FMV of the property or services taken in payment must be included in income.
2.      Cesarini v. U.S. (PT bought an old piano, in which there are money)
A.     As long as it is not excluded, it is income; Treasure trove is income
B.     Regulation is not limited to cash, property included too.
 
3.      Old Colony Trust Co. v. Comm’r. (employer paid tax for its employee)
A.     Holding: payment by er is taxable income;
·         Court look at substance, not form.
·         Gross income is broad than wage. Ala you are economic better off.
 
4.      Comm’r v. Glenshaw Glass.
A.     Punitive damage is income unless it is excluded by statute.
B.     All cash are taxable income unless law said not to
C.     “we have instance of undeniable accessions to wealth, clearly realized, and over which the TP have complete dominion”
·         Undeniable accession
·         Clearly realized
·         Complete dominion: belong to you NO CONDITION.
D.     Under this std, loans proceeds are not income b/c you have obligation to give it back.
5.      Present value = future value/(1+r)n
6.      Tax Litigation
Agent asserts a deficiencyà TP can appeal to Appeal Officeà Statutory NODà 90 days to file in TC (or pay deficiency and file in fed district ct, Or pay deficiency and file in court of federal claims)
7.      Imputed Income
A.     Types:
·         Income from the use of household durables
·         Income from the value of household services
B.     Two types of equities:
·         Horizontal equity: treat TP the same in the same position;
·         Vertical equity: treat TP fairly up and down
C.     Helvering v. Independent Life Ins. Co. p55
·         Holding: the rental value of the building used by the owner does not constitute income within the meaning of the 16th Amendment.
D.     Dean v. Comm’r (the FMV rental value where you live should be counted in gross income)
·         In this case, it is not imputed income anymore. It is sth given by a third party, even if the couple own the third party.
·         Corp cannot include the income to its own
·         Distingui

ployer incurs no substantial additional cost (including forgone revenue) in providing such service to the employee (determined without regard to any amount paid by the employee for such service)
·         non-discriminatory
·         reciprocal – same line
·         not necessary small amount
·         not stock or real estate.
 
3.      §132(c) Qualified employee discount: any employee discount with respect to qualified property or services to the extent such discount does not exceed-
A.     In the case of property, the gross profit percentage of the price at which the property is being offered by the employer to customers, or
B.     In the case of services, 20% of the price at which the services are being offered by the employer to customers
C.     gross profit percentage = (sales price of property sold – cost) / sales price of property sold
D.     no real property nor personal property of a kind held for investment.
·         Employee has independent duty to report it.
·         non-discriminatory (it is ok to give discount to only NY ees b/c only NY has store)
·         same line business???
 
4.      §132(d) Working Condition Fringe: any property or services provided to an employee of the employer to the extent that, if the employee paid for such property or service, such payment would be allowable as a deduction under section 162 or 167