Gross Income Inclusions and
When and How to Record Income
for Tax Purposes
Income Recognition for Tax Purposes
Similar to the recognition for accounting
Income must be realized and earned
However, three additional condition
Rental Property, Royalties and
Schedule E - Rentals
Schedule E is used for taxpayers who
Its just another profit/loss statements.
If rental activity shows a profit - it is
fully taxable as ordinary income.
Property: Basis and Sale
of Capital Assets
Realized Gain/Loss = amount realized
less adjusted basis.
Recognized Gain/Loss = amount of
realized gain/loss that gets reported on
the current years tax return.
Deferred Gain/Loss = r
Cash vs. Accrual
Cash method taxpayer income
Accrual method reportsdeducts when it
expenses when paid, and reports
is earned and expenses when they
income when cash is actually or
Standard Deduction, Filing Status,
Personal Exemptions, and More.
A two-page form, with a few supporting
schedules, which is more complicated than
the 1040EZ, but less complicated than the
I never use this form.
Introduction to Taxation
Income Tax Objectives
Main Purpose: To
raise revenue for the
Authorizes congress to
levy and collect taxes