Chapter 5 class notes

Chapter 5 class notes - Chapter 5-Gross Income I.R.C. 61...

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Chapter 5-Gross Income I.R.C. § 61 defines gross income as follows: (a) 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 and Royalties 6. Dividends 7. Alimony and separate maintenance payments 8. Annuities 9. Pensions 10. Income from discharge of indebtedness 11. Distributive share of partnership gross income 12. Income in respect of a decedent; and 13. Income from an interest in an estate or trust Despite the statute’s detailed enumeration of income items, the list is not comprehensive. The items specified are examples of the more common types of income. Although the definition of gross income is broad, certain types of income are excluded from gross income by statute (the Internal Revenue Code), administrative rulings (e.g. IRS regulations and revenue rulings) and/or court decisions (e.g., Tax Court, District Court, Court of Claims, Appeals Courts or Supreme Court) Examples of IRC Sections that exclude specified items from gross income include: § 101 Life Insurance Proceeds § 102 Gifts and Inheritances § 103 Interest on State and Local Bonds (that is interest on municipal obligations) § 104 Compensation for Injuries and Sickness Specifically excludes from gross income the amount of any damages awarded for personal physical injury or physical sickness on the grounds that the amount received represents a return of the personal capital destroyed. §105 Contribution by Employer to Accident and Health Plans Amounts paid to an insurance company for health insurance for an employee, the employee’s spouse and children are excluded under this provision §121 Exclusion of Gain from the Sale of Personal Residence §127 Educational Assistance Programs-up to $5,250 under certain circumstances §132 (a)Certain Fringe Benefits (1) no-additional cost service (2) qualified employee discount (3) working conditioning fringe (4) de minimis fringe (5) qualified transportation fringe
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(6) qualified moving expense reimbursement §401 Qualified Pension Plans Amounts paid to a qualified pension plan on an employee’s behalf (by an employer) are excluded from the employee’s current gross income, along with the income annually earned on these investments. Typically these plans require a retired employee to begin making distributions from these plans no later than age 70 and one-half. The amounts distributed to the retired employee are included in gross income in the year distributed. _______________________________________________________________ Economists define income in a very different manner.
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Chapter 5 class notes - Chapter 5-Gross Income I.R.C. 61...

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