Chapter 4 Notes Fall 2009

Chapter 4 Notes Fall 2009 - TAX 4001 CHAPTER 4 NOTES Spring...

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TAX 4001 CHAPTER 4 NOTES Spring 2010
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MAJOR CONCEPTS Definition of Gross Income Accounting Methods Constructive Receipt Prepaid Income (Claim of Right Doctrine) Who is Taxed on Income (Assignment of  Income Doctrine) Specific Exclusions Municipal Bond Interest Life Insurance Proceeds
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MAJOR CONCEPTS (CONT’D) Specific Inclusions Below-Market Rate Loans Items Both Included and Excluded Leasehold Improvements Discharge of Indebtedness TAX BENEFIT RULE Specially Taxed Items Dividends Capital Gains
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DEFINTION OF GROSS INCOME The Internal Revenue Code generally regards  all items of income taxable unless otherwise  provided. Similarly,  no items are deductible unless  specifically allowed (more on these rules in  Chapter 5). One major distinction between the concept of  taxable income and accounting income is the  “ability to pay concept”. If a taxpayer is involved in a transaction  where cash or cash equivalents are not  received, non-recognition and/or deferral is  often available.
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(CONT’D): Examples:  Installment Sales and  Like-Kind Exchanges Alternatively, when a taxpayer  receives cash with no binding  obligation for repayment, that amount  is often recognized as income. Examples:  Prepaid Rent and 
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Chapter 4 Notes Fall 2009 - TAX 4001 CHAPTER 4 NOTES Spring...

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