Gross Income: Other Inclusions Flashcards
Alimony
Both income and a deduction,
payments in CASH to or for benefit of ex-spouse pursuant to WRITTEN AGREEMENT, payor and payee DON”T LIVE TOGETHER, deal is IF PAYEE DIES PAYMENTS STOP
Not Alimony If:
payment will be recused upon occurrence of an event relating to the child.
Permanent portion of payment will be determined as alimony, fluctuating piece will be child support.
Front end loaded.
Child Support
Not income, and not deductible
Property Settlement
Not income, not deductible
Stolen Items
Gross income to thief, theft is not a loan because victim did not consent
Illegal Income
Gross Income, required to be reported and tax must be paid thereon.
Tax benefit Rule
Correct of past year’s deduction to reflect changed circumstances if: taxpayer took legitimate deuction in prior year AND something happens in current that is fundamentally inconsistent with premise of deduction THEN taxpayer must report as income in the current year the amount of the previous year’s deduction.
Realizing Losses/Gains From Dealings In Property
Gain or Loss is only realized when Property is SOLD, SWAPPED
Computation of Gain or Loss
Amount Realized, Adjusted Basis = Taxpayers Gain/Loss
Gambling
Treated like sale, amount wagered is basis; winnings are amount realized
Gains are income, losses are deductible ONLY against gambling gains from current year.
Loans and Property
When buyer of property assume ANY liability of the seller as part of the sale (i.e., outstanding balancing)
Outstanding balance on loan is treated as an additional AMOUNT REALIZED on the sale.
Buyer’s basis the buyer’s cash payment plus liability he has taken over
Exclusion of Gain on Principal Residence
Must have lived in residence 2 out of the past 5 years.
250k for single or 500k for married.
