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Individual Tax
University of South Carolina School of Law
Quirk, William J.

Chapter 1:
 
 
·        Page 131 Supp. – Constitution’s take on Taxes
§      Article 1: No direct Tax – Problem with creating income tax
§      Led to 16th Amend.
§         Congress shall have the power to lay and collect taxes on INCOME – from whatever source derived
§         Allowed the creation of income tax to redistribute money
·        Income tax collects 1.1 trillion
§      Corp Tax – 200 billion
§      S.S – 771 Billion
§      Excise – 87 billion
·        Total: 2.2 Trillion taken in
·        We spend 2.6 trillion = deficit! – The government is borrowing money, not paying as they go.
·        2 main supports for the federal gov’t: 1) Income Tax    2) Social Security Tax
·        Income Tax = Progressive
§      As you earn more you pay a higher percentage
§      Those under $20K pay northing, they get money back
·        S.S. Tax = Regressive
·        Where does the money come from?
§      Page 3 Supp – Distribution of Federal Individual Income Tax Liability
§      Progressive Tax – 2.2% (highest income) of the population ($200K and above) pay 42.7% of the taxes
§      8.0% of the population ($100-$200K) pay 24.1% of the income taxes
§      So, over ½ of the income taxis paid by 10% of the population
§      Page 4 Supp – Distribution of all Federal Tax Liability (including S.S. – a regressive tax).
§      The poor people pay more in S.S. tax than the wealthy people, but less in income taxes – so it ends up being a relatively flat tax.
·        Section 1 in Code Book = Progressive Tax
·        Flat Tax = One rate – everyone pays the same
·        Regressive Tax (Like S.S. – caps at $87K) –
 
Chapter 2: Gross Income
 
·        Old Colony Trust Co. v. Commissioner
§      Facts: Company agreed pay the president’s personal income tax. The president then only claimed his net salary, not considering the income tax that the company paid for him.
§      Issue: Whether the tax payer, having induced a third person to pay his income tax or having acquiesced in such payment as made in discharge of an obligation to him, may avoid the making of a return thereof and the payment of a corresponding tax? No.
·      The income tax paid by the co. is income even though the president did not receive cash but merely a benefit. IT was bargained for in exchange for the president’s work upon valuable consideration. They were income
§      Black Letter Rule: Gross income is not limited to situations in which cash is actually received by the tax payer.
·     

h property.
o       Broad definition.
·      § 101-150 – enumerated list of what is considered to be “not income”
·      What is income?
·      To whom is it income?
·      What is the value of the non-money income
·      § 262 – Personal, living, family expenses
o       No deduction allowed for these expenses
o       Telephone line is a personal expense
·      How to escape paying income:
o       Gift – not income
o       Tools of the Trade – not income
§         If you were a food critic – cost of the meal is a tool of the trade
o       No Cost –
§         President argued this applied to the family when he was flying – if there is an empty seat when he is flying – what diff does it make if someone comes along?
o       Residual
§          
 
·      What if you caught Barry Bonds 600th home run ball – is this income?
Glenshaw Glass Case: Source of income is irrelevant – all income become questions become simple enrichment – all gains are taxable – whether traceable to labor,