Gross Income

Question 1

Gross income statute

Answer 1

§61… “all income from whatever source derived” ……. REMEMBER if source is not specifically excluded by the code from income, it’s going to be included in gross income

Question 2

In order for gross income to be includable it must be:

Answer 2

Recognized AND realized

Question 3

Income is recognized as gross income when:

Answer 3

a. Taxpayer receives an economic benefit; AND; b. Realizes the income; AND c. The income isn’t excluded by the Code

Question 4

2. Income is realized when [Regulation 1.61(a)]

Answer 4

a. Taxpayer engages in a transaction with another party; AND b. The transaction results in measureable changes in property rights c. **Income is realized when it’s made real (but don’t have to included until recognized)**

Question 5

Employer paying something that employee legally has to pay

Answer 5

INCLUDABLE in gross income Old Colony Trust Co. v. Commissioner 1. FACTS – Employer agreed to pay Employees taxes 2. HOLDING – Payment of the employees taxes constituted income because they were paid in consideration for the services employee rendered and as compensation for gains derived from employees labor

Question 6

Punitive damages

Answer 6

INCLUDABLE in gross income

Question 7

Accessions to wealth

Answer 7

INCLUDABLE in gross income Examples: 1. Gain 2. Rent 3. Benefits 4. Discharge of indebtedness

Question 8

Not accessions to wealth = not income

Answer 8

Examples: 1. Loans 2. Rebate → the rebate is already accounted for in the price of the product 3. Not realized (i.e. did not sell it) 4. Imputed income – doing services for your yourself)