20110.5 Gross income and Exclusions

20110.5 Gross income and Exclusions - Gross Income Concepts...

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Gross Income Concepts & Inclusions
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Income “If it comes in, it’s income.” Generally must be a transfer or transaction. When Mark McGwire hit his 62 nd  homerun, a  groundskeeper retrieved the ball.  A collector  offered him $1Mil. For the ball.  Is the ball  taxable to the groundskeeper? Subsequently, the groundskeeper gave the ball  to McGwire.  Should he now pay gift tax?
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Whose Income? Fruit of the tree doctrine Community property Not followed if spouses live apart for the entire year,  are not MFJ, do not transfer income between them Alimony (review),* not including front-end  loading which must be recaptured Property placed in trust Flow-through income S-Corporation (1120S) Partnership, LLC (1065)
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Sample Test Question 11. F’s share of income from various sources is as follows for the  current year: Source F’s share   F’s Dist. ABC Partnership after partner’s salary   $  6,000 $ 9,000 F’s salary from ABC Partnership     n/a  30,000 XYZ Corporation, a C corporation   80,000  10,000 Interest from bank savings account   40,000     n/a F’s A.G.I. (ignoring the deduction for one half of any self employment  tax) is how much? a. $89,000 b. $156,000 c. $86,000 d. $56,000
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Robert Lucas wins the Nobel Prize! …and received $1Mil. In 1995.   However, when he divorced in 1988, he  agreed to give his wife ½ should he win  before 10/31/95.  He won 10/10/95.  The terms of the agreement are sealed,  but worst case: he’s taxed on all, and left  with…. $100,000 at a 40% state & fed rate
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Income Income recognized under either cash or accrual basis, as  prescribed by law or by hybrid method where allowed Cash basis: Cash method includes “constructive receipt.” Payment can be made with borrowed funds: Credit card expenses deductible when charged Prepayments of expenses for longer than 1-year must be  amortized. Valued at FMV of most objective side of transaction
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This note was uploaded on 03/27/2012 for the course ACCT 3321 taught by Professor Chambers during the Spring '09 term at Texas A&M University, Corpus Christi.

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20110.5 Gross income and Exclusions - Gross Income Concepts...

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