Text Notes Ch 5 - Gross Income

Text Notes Ch 5 - Gross Income - Text Notes Ch 5 - Gross...

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Compensation for services, including fees, commissions, fringe benefits, and similar items: i. Gross income derived from business ii. Gains from dealing property iii. Interest iv. Rents v. Royalties vi. Dividends vii. Alimony viii. Annuities ix. Income from life insurance and endowment contracts x. Pensions xi. Income from discharge of indebtedness xii. Partnership income xiii. Section 61 provides concept" gross income means all income from whatever source derived" unless specifically excluded or other wise not taxed a. Economic concept of income - change in net worth, consumptions and change in net worth must be computed using market bal on accrual basis b. Accounting concept if income - recognize income when it is realized c. Eisner v macaober 1918 - income must be realized before I can be taxed, i. 1) Accounting methods - may defer recognition of income follow particular method of acct 2) Non-taxable exchange - example swap land costing 10000 with another worth 50000 not req to recognize 40000 gain under like-kind exchange rule 3) 3 exceptions to general rule ii. Income for tax purposed: judicial concept - d. Key case - lucas v Earl - Supreme ct "fruit belongs to tree from which it great" income belongs to one who earned it i. Helvering v Horst "income from prop belong to person owns the prop" ii. Who's income is it - problem 5.27 e. Form of benefit - Receipt of cash not necessary in order to have taxable income. i. Sale or disposition - not limited to loans. Determine income on sale ir dispo of prop by reducing amount realized (cash + FMV of other receipts such as property) by adjusted basis of property. Example - stock for 10000, purchased for 60000, realized gains = 4000 (10000-6000) 1) Damages - applies to amounts award for injuries inflicted upon taxpayer - excludes from income amount of damages awarded for personal physical injury or physical sickness on grounds that amount received represents return of personal capital destroyed 2) Other consideration - rules for how receipt should be apportioned between capital and income. Example amount from life insurance policy not taxable on idea that proceeds represent a return on taxpayers premium payments 3) Return of Capital - when taxpayer lends money and it is repaid later no income is recognized ii. Indirect economic benefit - current law grants exclusion only if employee can demonstrate benefit serviced bus purpose of employer other than to compensate the employee iii. Examples
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This note was uploaded on 09/08/2010 for the course BUS 123A at San Jose State University .

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Text Notes Ch 5 - Gross Income - Text Notes Ch 5 - Gross...

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