CHAPTER 5 student F10 - CHAPTER 5 GROSS INCOME AND...

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CHAPTER 5 GROSS INCOME AND EXCLUSIONS
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Tax Formula Income (broadly conceived) $x,xxx Less:Exclusions (x,xxx) Gross Income $x,xxx Less:Deductions for AGI (x,xxx) Adjusted Gross Income (AGI) $x,xxx Less:The greater of- Total itemized deductions or the standard deduction (x,xxx) Personal & dependency exemptions (x,xxx) Taxable Income $x,xxx
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GROSS INCOME IRC Section 61 Except as otherwise provided in this subtitle, gross income means all income from whatever source derived. Economic concept of income Accounting concept of income
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INCOME Financial accounting income versus Taxable income
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INCOME SOURCES Personal Services (earned income) W-2 & Self-Employment “fruit & tree” Income from Property Interest, dividends, rent Gifts of income producing property??? “assignment of income”
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Who Recognizes the Income? Community Property States AZ, CA, ID, LA, NV, NM,TX, WA, WI ½ of income from services of either spouse TX, LA, WI, ID – ½ of income from property owned separately AZ, CA, NV, NM, WA –all income from property owned separately taxed to owner Common Law States All other states All income from services and property owned separately taxed to person who performed services or owns property
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Inclusions Alimony Annuities (income element) Awards Back pay Bargain purchase from employer Bonuses Breach of contract damages Business income Clergy fees Commissions
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