Tax- Waggoner- Fall 2006- Lane - GROSS INCOME 61 I Cash...

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GROSS INCOME  -  §61  I. Cash Receipts - Does Source Matter? A. Not in general 1. Glenshaw Glass  - Created broad definition of income - anything is income unless Congress  exempts.  Undeniable accessions to wealth, clearly realized, and over which the taxpayer has  complete dominion. a. This case is a high water mark, it has been eroded.  Even at the time, fringe benefits were  not taxed.  b. Rejected the narrow view of  Eisner  that income was derived from capital and labor.   c. Today this is looked at somewhere between Eisner and Glenshaw - broad analysis with  fairness element.   2. POLICY - we want to make the system efficient by precluding weak arguments that waste  courts time.   3. Cesarini  - treasure trove case - taxable in year converted to cash, or right away if cash - but  for practical purposes, who says anything? B. But Tax Free Recovery of Capital is Allowed 1. Basis - unrecovered investment in property C. It Matters when Congress says it Matters 1. Gifts - §102 a. Duberstein  - stems from the  detached and disinterested generosity  of the donor. If its  in business context, then taxable  b. Question for finder of fact, must be reasonable.   c. Gift is made from already taxed income, not taxed to donee. d. POLICY - only tax money once, gifts flow from rich to poor - so more revenue.     e. §102c  - gifts from employer to employee always taxable f. 274(b)  - business can get 25$ deduction for gifts to clients g. Stanton  - on the facts, gift to former employee by church during depression were tax free  gift.   2. Compensation for injuries of Sickness  §104 a. POLICY - you are not taxed on good health, so you shouldn’t be taxed on compensation  for loss of it. b. Lost Wages  are also excluded because of bunching, cont. fee, and difficulty in allocation. c. Physical Injury Required  - emotional distress does not count d. Medical Care - always deductible, even if result of ED e. Interest earned on damages is taxable, so structured settlements for the same amount of  money you would earn are preferred. f. Punitive Damages  are taxable because they represent a windfall. g. Settlement  - not taxable for personal injuries 3. Life Insurance - §101  - no deduction, no tax when paid out a. Term - buy for a term of years, only get something if you die b. Whole Life - has an element of savings and Term Life i. Essentially tax free savings ii. Basis first when taking out funds, term life premium is part of your basis  iii. Can take tax free loan against iv. You only pay tax when you live beyond LE or take out money.
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  • Spring '06
  • Perry
  • Tax law, Taxation in the United States

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