FUNDAMENTALS OF INCOME TAX by eiv15173

VIEWS: 9 PAGES: 4

									                                         TAX I
I.    BASIC PRINCIPLES
      A.   POLICY CONCERNS……………………………………………………...                                   2
      B.   PROGRESSIVITY
      C.   SOURCES OF LAW………………………………………………………. 3
      D.   HOW TO GET TO COURT………………………………………………. 4

II.   INCOME: Glenshaw Glass and § 61…..…………………………………………. 5
      A.   ECONOMIC ACCRETION & NON-CASH BENEFITS
           1.     TREASURE TROVE AND WINDFALLS
           2.     Compensation for Services………………………………………… 6
                  a.     Cash payments: § 61
                  b.     Non-cash receipts
                         i.      ECONOMIC BENEFIT: Drescher
                         ii.     BARTER EXCHANGES: Rev. Ruling 79-24
      B.   STATUTORY EXCLUSIONS (NARROWLY)…………………………. 8
           1.     IMPUTED INCOME
           2.     MEALS AND LODGING: § 119………………………………... 9
           2.5.   FRINGE BENEFITS: § 132(a)(4)...……………………………... 10
           3.     LIFE INSURANCE: § 101(a)(1)
           4.     GIFTS, BEQUESTS & DEVISES: § 102
*          5.     INTEREST ON LOCAL BONDS: § 103……………………….. 12
           6.     RECOVERIES FOR INJURY: § 104…………………………… 13
      C.   BASIS: §§ 1012 & 1016 (adj.)…..………………………………………… 14
           1.     General Rule (1012):: cost of prop. ($ + prop. + assumed liab.)
           2.     Special Basis Rules…………………………………………………. 15
                  a.     BEQUESTS & DEVISES: § 1014
                  b.     GIFTS: § 1015



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              c.    MARRIAGE PROP.: §§ 1015(e) & 1041………………... 16


    D.   TREATMENT OF TAXPAYER'S DEBT/OBLIGATION…………….                16
         1.   LOAN PROCEEDS
         2.   SATISFACTION OF DEBT (gift; svcs.; prop.)
         3.   CANCELLATION/DISCHARGE OF DEBT…………………... 17
              a.    Included in GI: § 61(a)(12)
              b.    Exceptions: § 108 (i.e., excluded – bankruptcy)
         4.   PYMT. OF ANOTHER’S DEBT: Old Colony………...………... 18
         5.   TRANSFERS OF PROPERTY WITH DEBT
              a.    ASSUMPTION OF RECOURSE DEBT
              b.    NON-RECOURSE DEBT: § 1.1001-2…………………... 19
    E.   TIMING OF INCOME INCLUSION
         1.   ANNUAL ACCOUNTING: § 441(A)
         2.   CONSEQUENCES OF ABOVE
              a.    TRANSACTION SPANNING TAX YRS. (see § 172)
              b.    TAX BENEFIT RULE: § 111(a)………………………… 20
              c.    CLAIM OF RT. DOCTRINE: § 1341
         3.   REALIZATION & RECOGNITION ISSUES
              a.    Generally recognized: § 1001(c)
              b.    LIKE-KIND EXCHANGES: § 1031…..………………... 21
              c.    Potential gain eliminated (2 ways)………………………….     23
         4.   CONSTRUCTIVE RECEIPT & ECON. BENEFIT…..……….. 24
              a.    ECONOMIC BENEFIT
              b.    CONSTRUCTIVE RECEIPT
*             c.    ANALYSIS………………………………………………... 25




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II.    DEDUCTIONS FROM GROSS INCOME FOR EXPENSES………………... 26
       A.   IN GENERAL (only if specifically allowed by CODE)
*           1.        AGI for individual = GI minus deductions: § 62
            2.        Statutory scheme (various Code sections)
*           3.        ANALYSIS: 3 questions to ask regarding expenses
       B.   CURRENT EXPENSE v. CAPITAL EXPENDITURE
       C.   BUSINESS DEDUCTIONS……………………………………………… 27
            1.        ORDINARY & NECESSARY BUS. EXPENSES: § 163
            2.        DEPRECIATION & AMORTIZATION: §§ 167-168…………. 28
            3.        RENT: Substance over Form Doctrine…………………………. 29
            4.        LOSSES: § 165
       D.   PERSONAL DEDUCTIONS: GEN. NOT DED: § 262(a)…………….. 30
       E.   MIXED PERSONAL & BUSINESS EXPENSES: § 183……….……… 31
            1.        TRAVEL & ENTERTAINMENT: §§ 162 & 274
            2.        COMMUTING EXPENSES

III.   SPLITTING OF INCOME: WHO HAS INCOME?…………………………... 32
       A.   General
       B.   INCOME FROM SERVICES
       C.   APPRECIATED ASSETS - When GIVEN
       D.   SEPARATION AND DIVORCE: § 1041
            1.        PROPERTY TRANSFERS
                 2.        CASH: ALIMONY & SUPPORT (§§ 71 & 215)

IV.    CAPITAL GAINS & LOSSES: KIND OF INCOME?………………………… 33
       A.   POLICY



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B.   WHAT ARE CAPITAL GAINS: § 1221
C.   WHAT DO YOU DO WITH THEM? *see HO………………………….. 34
D.   1231 Assets *see HO
E.   BIG PICTURE - BASICALLY 3 kinds of assets




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