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Unformatted text preview: GROSS INCOME: OVERVIEW & HIGHLIGHTS (to accompany Unit#2 – Chapter 3 - 2012 Edition – PH Federal Taxation Comprehensive Edition) Dr.Faye Bradwick – Acct421/Acct521 – Fed.Tax#1 – IUP – ECOBIT – Accounting Dept – Fall 2011 1. The Key to Determining Taxable Income: • What is income? • When is it income? • Whose income is it? 2. Income is the First Component of the Tax Formula: • Sec. 61 general definition -- "the dragnet" • Emphasis is on realization • Tax law relies heavily on case law in this area • Sometimes must use economist approach (ie.net worth method) if all else fails &/or records are destroyed (i.e. consumption + change in net worth measured by using FMV but very cumbersome) • TI includes barter income (cash equivalent doctrine) 3. Financial Accounting Concept Applied: • The realization principle of accounting (earnings process complete & the assets received are capable of being value) is reflected in the tax concept of income primarily to aid in administration by providing...
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- Spring '10
- Economics, Taxation in the United States, Generally Accepted Accounting Principles, Sec.