Tax Outline
FEDERAL INCOME TAXATION OUTLINE
Gross Income
Gross Income Defined (§61) – except as otherwise provided, gross income means all income from whatever source derived, including (but not limited to) the following items:
Compensation for services, including fees, commissions, fringe benefits, and similar items;
Gross income derived from business
Gains derived from dealings in property
Interest
Rents
Royalties
Dividends
Alimony and separate maintenance payments
Annuities
Income from life insurance and endowment contracts
Pensions
Income from discharge of indebtedness
Distributive share of partnership gross income
Income in respect of a decedent; and
Income from an interest in an estate or trust
§ 1.61-1(a) – Gross income includes income realized in any form, whether in money, property or services.
Gross income includes the receipt of any financial benefit which is
Not a mere return of capital, and
Not accompanied by a contemporaneously acknowledged obligation to repay, and
Not excluded by a specific statutory provision
§ 1.61-2(d)
If services are paid for in property, the FMV of the property must be included in gross income
If property is transferred by an employer to an employee or is transferred as compensation for services, for an amount less than its FMV, then the difference between the amount paid for the property and the FMV at the time of the transfer is compensation and is included in gross income.
Basis on subsequent sale = amount paid for property + difference
Clear realization can be evidenced by selling the property
Windfalls are included in gross income
Gross income does not include exemptions or exclusions
Gross income is:
An undeniable accession to wealth
Clearly realized
And over which the taxpayers have complete dominion
Haig-Simons Definition of Income = Personal Consumption + Change in year end wealth
Both unlawful and lawful gains are included in gross income
Types of Compensation
Direct Compensation
Gross Income
Gross Income Defined (§61) – except as otherwise provided, gross income means all income from whatever source derived, including (but not limited to) the following items:
Compensation for services, including fees, commissions, fringe benefits, and similar items;
Gross income derived from business
Gains derived from dealings in property
Interest
Rents
Royalties
Dividends
Alimony and separate maintenance payments
Annuities
Income from life insurance and endowment contracts
Pensions
Income from discharge of indebtedness
Distributive share of partnership gross income
Income in respect of a decedent; and
Income from an interest in an estate or trust
§ 1.61-1(a) – Gross income includes income realized in any form, whether in money, property or services.
Gross income includes the receipt of any financial benefit which is
Not a mere return of capital, and
Not accompanied by a contemporaneously acknowledged obligation to repay, and
Not excluded by a specific statutory provision
§ 1.61-2(d)
If services are paid for in property, the FMV of the property must be included in gross income
If property is transferred by an employer to an employee or is transferred as compensation for services, for an amount less than its FMV, then the difference between the amount paid for the property and the FMV at the time of the transfer is compensation and is included in gross income.
Basis on subsequent sale = amount paid for property + difference
Clear realization can be evidenced by selling the property
Windfalls are included in gross income
Gross income does not include exemptions or exclusions
Gross income is:
An undeniable accession to wealth
Clearly realized
And over which the taxpayers have complete dominion
Haig-Simons Definition of Income = Personal Consumption + Change in year end wealth
Both unlawful and lawful gains are included in gross income
Types of Compensation
Direct Compensation