Federal Income Tax Template
§63(a) TAXABLE INCOME:
Taxable income means gross income (I (included), II(excluded), III(proper taxpayer), IV (timing and limitations of recognition of GI) – deductions (V (AGI = GI – deductions) other than standard deductions (Itemized/Non Itemized) (VI. A.) – Personal Exemptions (VI. B.)
I. Items Included in Gross Income
Added Case Law
Commissioner v. Glenshaw Glass
Reg. 1.61-14
Any accession to wealth, the very broad statutory definition is given full effect and deference. Essentially a rough starting point is that everything is gross income unless explicitly excluded.
Cessarini v. United States
– treasure trove is not exempted from gross income (found money). Unless expressly excluded by law gross income includes all income from whatever source derived.
Start with the proposition that any benefit received is income, and then remove specific circumstances from the definition.
Old Colony Trust Co. v. Commissioner – The payment by an employer of the income taxes assessed against his employee constitute additional taxable income to the employee.
Reg. 1.61-14
The discharge by a third person of an obligation to him is equivalent to receipt of income. Considered compensation for services.
Mccann v. United States – When services are paid for in a form other than money, the FMV of the thing received must be included in gross income.
Absent any stipulated value for non-cash payments, courts will rely upon the actual monetary cost of providing the payment to the employees.
Revenue Ruling 79-24
Compensation for services
refers us to applicable § 61(a) §1.61-2
FMV of the goods or services exchanged are includible in Gross Income.
Pellar v. Commissioner – The purchase of property for less than its FMV does not of itself give rise to the realization of taxable income.
Bargain Purchases – arms length transactions, no gross income for a bargain purchase.
However, if property is transferred as compensation for services in an amount less than FMV, the difference between the amount paid and FMV is gross income.
Reg 1.61-2(d)(2) See (Pellar v. Commissioner).
provides that another person’s payment of the taxpayer’s income taxes constitutes gross income to the taxpayer unless excluded by law.
A. §61 Gross Income/Compensation
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Issue:
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– Types of Income to Consider in Determining of Gross Income
– What is NOT included in Gross Income:
:
– What IS included in Gross Income:
Commissioner v. Glenshaw Glass
A. Reg. § 1.61-1 “gross income includes income realized in any form, money, property, or services.
B. Reg. §1.61-2 Compensations (Cash) for services, including:
1. Fees,
2. Commissions,
3. AND Similar Items.
C. Reg. §1.61-2(d)(1): Compensation paid OTHER than .
1. (d)(1): “fair market value of property taken for payment must be included in gross income as compensation.”
2. (d)(1): Services paid for by other services: “fair market value of other services received is included in gross income.”
3. Rev. Rul 79-24: Barter Transactions(Services for Services): “Must include the value of property and services as Gross Income.”
CASH
D. Reg. §1.61-2(d)(2): Property transferred by Employer to Employee
1. (d)(2): Gross Income includes transfer as Compensation, value of compensation (employee) = “difference in the value paid for the property and the FMV at the time of t
o wealth, punitive damages are taxable income”
General Rule
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Example: 1) Benefiting from ownership and use of ones own Property
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How to Make this determination:
2. AND an intention to repay.
1. The recipient’ recognition of an obligation to repay2) Doing services for oneself ( EX: Lawyer drafts his own will)
Imputed Income
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1) Rev. Ruling 81-277: “For a taxpayer to have income under § 61, there must be an economic gain the benefits the taxpayer personally.”
a) When a lender receives cash, that cash represents a return of the cash that the lender originally gave the borrower, and thus there is no profit or economic gain.
Recovery of Capital:à Borrowed Funds:àCompensation
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Conclusion: ______ is/is not considered compensation under § 61 and thus is/is not included in the Taxpayer’s Gross Income. Only if there is an obligation to repay If you are to receive a rebate from property purchased, then that is not Gross Income. : Not included in GI: [§61(a)] “gross income includes all income from whatever source derived. Whether ______ is considered income under § 61 and thus should be included in the taxpayer’s Gross Income. provides that punitive damages such as treble damages under the anti-trust laws and exemplary damages for fraud are gross income – Money received as punitive damages must be included as gross income
