Engler F00-federal income tax outline

Engler F00-federal income tax outline - www.swapnotes.com...

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Federal Income Tax Outline Engler, Fall 2000 1 Federal Income Tax Outline § 61 – Income – gross income is all income from whatever source derived. (gives, e.g. ’s). Income definitions: 1. COMMISSIONER V. GLENSHAW GLASS Sup Ct defn of taxable income Facts : taxpayers got 3x damages under antitrust laws. Claimed that only compensatory part could be taxed b/c derived from labor or capital. Issue : whether punitive damages are taxable even tho not labor or capital? Held : Yes, they are. Must be: 1. undeniable accession to wealth 2. clearly realized 3. over which taxpayer has complete dominion. www.swapnotes.com
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Federal Income Tax Outline Engler, Fall 2000 2 CHAPTER 2 – Characteristics of Income 1. Noncash Benefits - clearly included under § 61 Reg 1.61-1(a); 1.61-2(d) - But, problem is a valuation one A. OLD COLONY V. COMMISSIONER Held : employer’s payment of federal income tax on behalf of employee = taxable income to the employee. b discharge of obligation to employee = receipt by person taxed. BUT, Essentially, with noncash benefits, there are valuation problems. What is the benefit worth to recipient? If firm gives employee company car… Employee pays tax. BANAGLIA V COMMISSIONER – pure meals and lodging case; objective valuation Facts : T was full time manager of hotel, got salary + food + lodging. No one considered food and lodging as compensation. IRS says food + lodging is taxable income. Held : Where food & lodging is primarily for the convenience of the employer , it is not taxable income. T wins. - But, T would have had to pay rent elsewhere - so he gets a tangible benefit that removes obligations he otherwise might have - Valuation problem: what would he have paid? Dissent: look to what someone who receives this all in $$ pays and make T pay it. Fairness concerns – is it fair to benefit taxpayers just because of their industry? Economic Consequences – hotel owners can pay less salary to account for taxpayers tax savings and this benefits the entire industry BUT - the dissents subjective valuation approach will probably undervalue, so IRS will have to litigate every time. Inefficient. § 119 – meals and lodging excluded provided, for convenience of employment: a. meals provided on employers business premises b. lodging is required of employee on the business premises as condition of employment Note : code says only “for convenience of employer” not “solely for convenience of employer.” SO, Could include part compensation…? Reg 1.119-1(a)(2) : must be a substantial, noncompensatory business purpose to satisfy employer’s convenience test. www.swapnotes.com
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Federal Income Tax Outline Engler, Fall 2000 3 b If cant satisfy employers convenience test, take objective FMV of benefit received as taxable amt. -
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This note was uploaded on 02/14/2008 for the course LAW 7601 taught by Professor Cunnigham during the Fall '03 term at Yeshiva.

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Engler F00-federal income tax outline - www.swapnotes.com...

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