Gross Income Flashcards
Economic income “
Some income isn’t subject to tax. EI represents the ability to pay tax.
What makes up economic income
- Consumption
2. Changes in savings- this is deferred consumption
How do we measure economic income
Indirectly:
- Receipts (labor income, capital income, prizes.
- Subtract profit seeking expenses (business and investment exp)
- Add/subtract change in value of existing assets
- Add in kind contributions (bus jet for vaca).
vertical equity
How much more tax should rich pay than the poor?
horizontal equity
people with same economic income should be taxed the same amount
Factors of gross income:
- Exemption from tax
- timing- when will itve taxed
Setion 161 gives list- narrowed by 101
New definition of income from glenshaw v glass
-Taxpayers undeniable accession to wealth, clearly realized, and over which taxpayers have complete dominion.
Employer paying taxes for employee (old connoly trust)
is a form of compensation. You cant avoid tax by someone paying on your behalf.
Profit seeking expenses section #
162
exemptions sections
starts at 151 narrowed by 101
Form of compensation
is irrelevant
Bargain purchase
Don’t have income at time of purchase
Why don’t we tax bargain purchase
- Admin concern- How do we valuate?
3. Liquidity concern
Treasure trove
Reportable when you find- 1.61-14
gifts
Generally excluded from income
