Gross Income

Question 1

Gross Income

Answer 1

Ch. 2, IRC §61, Treas. Reg. 1.61-1-1.61-14

Question 2

General Definition of Income

Answer 2

Anything that increases the size/value of your patrimony unless there’s an exception.

Question 3

Haig-Simons Definition - Economist Definition of Income

Answer 3

Income includes gains or increases in wealth over a particular period of time regardless of whether the income is spent on consumption or saved.
•Problems: Would include simple appreciation in home value, and would require people to get homes appraised every year.

Question 4

Eisner v. Macomber Definition (First SCOTUS Definition of Income)

Answer 4

“Income may be defined as the gain derived from capital, from labor, or from both combined.”

•Problems: Wouldn’t include gifts, inheritances, winnings, debt discharge, etc.

Question 5

Glenshaw Glass Definition of Income

Answer 5

Income is the “undeniable (1) accessions to wealth, (2) clearly realized, and over which taxpayers have (3) complete dominion.”

Question 6

Glenshaw Glass – Realization Requirement

Answer 6

Realization doesn’t occur, and income or gain isn’t recorded, until a provider of services or a seller of property has fulfilled all material steps on their side of the bargain.

Question 7

IRC §61: General Definition of Income – (1-5)

Answer 7

(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;

Question 8

IRC 61 –(6-10)

Answer 8

(6) Royalties;
(7) Dividends;
(8) Annuities;
(9) Income from life insurance and endowment contracts;
(10) Pensions;

Question 9

IRC 61 –(11-14)

Answer 9

(11) Income from discharge of indebtedness;
(12) Distributive share of partnership gross income;
(13) Income in respect of a decedent; and
(14) Income from an interest in an estate or trust.

Question 10

26 C.F.R. § 1.61-1 / Treas. Reg. 1.61-1: General Definition (Income)

Answer 10

• Gross income means all income from whatever source derived, unless excluded by law.
• Gross income includes income realized in any form, whether in money, property, or services.
• Income may be realized, therefore, in the form of services, meals, accommodations, stock, or other property, as well as in cash.

Question 11

26 C.F.R. § 1/61-2 / Treas. Reg. 1.61-2: Compensation for Services

Answer 11

(a)(1) Wages, salaries, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses (including Christmas bonuses), termination or severance pay, rewards, jury fees, marriage fees and other contributions received by a clergyman for services, pay of persons in the military or naval forces of the United States, retired pay of employees, pensions, and retirement allowances are income to the recipients unless excluded by law.

Question 12

Statutory Exclusions from “Gross Income”

Answer 12

• Gifts (not prizes)
• Discharge of Indebtedness (if it falls under a sec. 108 exclusion)
• Employee Benefits

Question 13

“Gross Income” Exclusions Based on Long-Standing Administrative Practices

Answer 13

(1) General Welfare Exclusion
(2) Imputed Income
(3) Bargain Purchases
(4) Frequent Flyer Trips
(5) Credit Card Benefits

Question 14

Gross Income May be Realized in Any Form

Answer 14

• Section 61 doesn’t make a distinction between cash and non-cash benefits.
• Gross income may be realized in any form, whether money, property, or services.
• Property –The FMV of the property received is the amount of income reported.
• Services – The FMV of the services received is the amount to be included.

Question 15

Stolen Things

Answer 15

• Taxable income despite obligation to restore the funds.

* James v. US –If you get caught and have to give the stolen funds/goods back, get a deduction the next year.