Chapter 2 - GOALS FOR FEBRUARY 13 Chapter 2 Gross Income...

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GOALS FOR FEBRUARY 13 Chapter 2 – Gross Income Chapter 5 – Prizes & Awards Chapter 8 – Debt Discharge Chapter 9 – Damages
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Taxes in Real Life Baseball home run record Related to taxes, how? Don’t believe everything you read in the newspaper. What do you think?
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Chapter 2 – Gross Income Federal income tax is based upon “taxable income” Taxable income is: Gross income, less certain deductions Our first study will be to begin to determine what is “Gross Income” Section 61 is our starting point Has a broad definition of gross income and a NON-exhaustive list of 15 subsections.
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§ 61. Gross income defined. (a) General definition. Except as otherwise provided in this subtitle, gross income means all income from whatever source derived , including ( but not limited to ) the following items: (1) Compensation for services, including fees, commissions, fringe benefits, and similar items; (2) Gross income derived from business; (3) Gains derived from dealings in property; (4) Interest; (5) Rents; (6) Royalties; (7) Dividends; (8) Alimony and separate maintenance payments; (9) Annuities; (10) Income from life insurance and endowment contracts; (11) Pensions; (12) Income from discharge of indebtedness; (13) Distributive share of partnership gross income; (14) Income in respect of a decedent; and (15) Income from an interest in an estate or trust. (b) Cross references. For items specifically included in gross income, see part II (sec. 71 and following). For items specifically excluded from gross income, see part III (sec. 101 and following).
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Income not specifically noted in section 61 subsections Found money (Cesarini) Bills Paid on your behalf (Old Colony) Non-cash income (Charley) Illegal Profits (Capone) Money for Nothing (Rev Rul 79-24) Be Careful of Your Form (Dean)
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Cesarini v United States 296 F.Supp. 3 aff’d per curiam 428 F.2 nd 812 (6 th Cir. 1970) Basic facts: Cesarini’s purchased a used piano in 1957. In 1964, while cleaning they found over $4k inside the piano. They kept the money and originally reported it on their tax return for 1964. Later, they filed an amended return claiming the found money was not income. IRS denied the refund and a lawsuit was born.
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296 F.Supp. 3 aff’d per curiam 428 F.2 nd 812 (6 th Cir. 1970) The taxpayer made 3 different arguments for non-taxability: 1. Found money is not one of the 15 §61 subsections included in gross income. 2.
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Chapter 2 - GOALS FOR FEBRUARY 13 Chapter 2 Gross Income...

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