fGross Income
I) Defined
1) Sec 61(a)
(a) an undeniable accession to wealth clearly realized in which the TP has complete dominion and control.
2) Elements
(a) Undeniable Accession to wealth
(i) money, stocks, economic benefit (free vacay)
(b) Clearly Realized
(i) stock, not realized until sale or exchange
(c) Complete Dominion and Control
(i) Cesarini case, sec 61 doesn’t list a specific exception for treasure trove, or finding money.
3) Defined
(a) compensation for services, wages, tips, commission, rents, royalties, or gains from property
4) Disguised Comp
(a) Empployer/Emp’ee
(i) strong presumption of income if company has vacations or retreats
5) Loans
(a) not income b/c no accession to wealth b/c TP has to pay back
6) Claim of Right Doctrine
(a) a contingent obligation to repay
(i) IF and when you pay, you get a deduction but can’t wait
(ii) govt’ wants TP to report so they can use $ b/c of inflation
7) Formula
(a) AR: Amt Realized Cash + FMV + debt relief
(b) AB: Adj Basis Cost +/- adj’s after tax value of prop.
(c) Gain: AR – AB
II) Income Derived In Any Form
1) Property < Sec 61(a)(3) >
(a) Gain: excess amt. over unrecovered costs for property sold/exchanged
(b) Basis: costs/amt paid for an item
(c) Recovery of , 102 Capital: TP may recover investment before charged w/ disposition of property
2) Gifts/Inheritance
(a) excluded detached or disinterested generosity
(i) NA to amts transferred from Emp to Emp’ee (Bonus)
(ii) Family: strong presumption that it is a gift
(iii) Emp/Emp’ee: strong presumption not a gift, thus income
(b) Property Rec’d as a gift
(i) GR: basis same as if Donor still had it “Transferred Basis”
(ii) Exception: if basis > FMV at time of gift
(iii) Giftee can sell for value and not realize any gain
3) Scholarships and Prizes < sec 74 >
(a) Prizes: included b/c a clear accession to wealth
(i) Exception: Designate and transfer
· give up prize Timely and Before Used
(b) Scholarships
(i) Qualified
· tuition and related fees, supplies and
· quali
n and disputable if reserves appeal)
III) Excluded from Income
1) Compensation for Personal Injury or Sickness
(a) GR: Sec 104 and 105 EXCLUDE amts rec’d on account of personal physical injury or sickness
(b) Business and Property Dmgs
(i) awards taxed as the underlying item they’re replacing would have been taxed
(ii) ASK: In lieu of what were the dmgs awarded
(iii) Lost profits are included as profit would’ve been
(iv) Property Dmg
· Gain: Recovery for property dmg. against basis of property
(v) EX: ;Buy camera for $2k and damaged. Get $3k award. $1k taxed as GI
2) Com for Personal Physical Injury or Sickness
(a) Sec 104(a)(2) EXCLUDES awards for personal physical injury or sickness.
(i) LOOK for Tort Type claim
(ii) NOT PUNITIVES
(b) Emotional Distress ≠ Physical Injury
(i) only related med expenses Excluded
(c) When are lost wages excluded?
