{"id":970,"date":"2012-07-21T07:58:25","date_gmt":"2012-07-21T11:58:25","guid":{"rendered":"http:\/\/www.miblaw.com\/lawschool\/?p=970"},"modified":"2012-07-21T09:47:03","modified_gmt":"2012-07-21T13:47:03","slug":"federal-tax-outline-3","status":"publish","type":"post","link":"http:\/\/www.miblaw.com\/lawschool\/federal-tax-outline-3\/","title":{"rendered":"Federal Income Tax Outline \u2013 Page 3 Property Gains, Life Insurance"},"content":{"rendered":"

Gain from Dealings in Property \u2013 Chapter 6<\/h1>\n

 <\/p>\n

1001 – Amount Realized<\/p>\n

1012 – Basis = cost (most basic)<\/p>\n

1014 – Estate tax basis (decedent)<\/p>\n

1015 – Gift tax basis<\/p>\n

1041 – Transfers of property between spouses<\/p>\n

Cases:<\/em><\/p>\n

Philadelphia Park Amusement Co. v. United States<\/em><\/h3>\n

Cost basis is the fair market value of the property received; if we cannot determine with reasonable certainty the value for the property, it is fair to \u00a0 assume the properties are equal in an arms-length transaction<\/strong><\/p>\n

<\/em><\/strong>Taft v. Bowers<\/em><\/h3>\n

Donee assumes the donor’s basis in property acquired by gift (1015)<\/em><\/p>\n

Crane v. Commissioner<\/em><\/h3>\n

1041; husband and wife same entity<\/em><\/p>\n

Commissioner v. Tufts<\/em><\/h3>\n

Nonrecourse mortgage treated the same as a true loan
\n<\/em><\/p>\n

\u00a0<\/em><\/strong><\/p>\n

Life Insurance Proceeds and Annuities \u2013 Chapter 7<\/h1>\n

 <\/p>\n

Life Insurance Proceeds \u2013 Section 101<\/p>\n

101(d): Instead of taking proceeds, you leave it with the insurance company who makes payments to you with interest.<\/p>\n

    \n
  • Must understand the difference between insurance proceeds and annuities in how these are taxed<\/li>\n<\/ul>\n

    101(g): Terminally or chronically ill do not pay tax on proceeds from insurance policies<\/p>\n

      \n
    • However, there are limitations for chronically ill; there are none for terminally<\/li>\n<\/ul>\n

       <\/p>\n

      Annuities \u2013 72<\/h2>\n

      72(b): Exclusion Ratio = Investment Contract\/Total Expected Return<\/p>\n

      \u2013\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 The exclusion rate is EXCLUDED from gross income<\/p>\n

      \u2013\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 The remaining is INCLUDED in gross income<\/p>\n

      Page 159 for example<\/p>\n

       <\/p>\n

      Discharge of Indebtedness \u2013 Chapter 8<\/strong><\/h1>\n

       <\/p>\n

      61(a)(12) \u2013 Discharge of Indebtedness (Included in Gross Income)<\/p>\n

      108 \u2013 Can exclude or defer<\/p>\n

      108(b) \u2013 not a total freebie, just a deferral<\/p>\n

      Debt discharge amount<\/strong>: The amount of discharged debt which is excluded from gross income by virtue of the bill’s provision is to be applied to reduce certain tax attributes.<\/p>\n

      The debt discharge amount is applied to reduce the taxpayer’s tax attributes in the following order:<\/p>\n

        \n
      1. Net operating losses and carryovers;<\/li>\n
      2. Carryovers of the [general business credit]<\/li>\n
      3. The Section 53 alternative minimum tax credit<\/li>\n
      4. Capital losses and carryovers;<\/li>\n
      5. The basis of the taxpayer’s assets (both depreciable and nondepreciable);<\/li>\n
      6. Carryovers of passive activity losses or credits;<\/li>\n
      7. Carryovers of the foreign tax credit<\/li>\n<\/ol>\n

        A business loss can be put back 2 years or forward 20 years<\/p>\n

        Debt discharge outside of bankruptcy<\/p>\n

          \n
        • The amount of debt discharge is excluded from gross income up to the amount by which the taxpayer is insolvent<\/li>\n<\/ul>\n

          \u00a0<\/em><\/strong><\/p>\n

          Damages and Related Receipts \u2013 Chapter 9<\/strong><\/h1>\n

          Sections 104 \u2013 106<\/p>\n

          Punitive damages are taxable ALL the time<\/strong><\/p>\n

          All exclusions under 104 and 105(b) are restricted by an “except<\/em>” clause:<\/p>\n

            \n
          • Except in the case of amounts attributable to (and not in excess of) deductions allowed under Section 213 (relating to medical, etc., expenses) for any prior taxable year<\/li>\n
          • Example:\n
              \n
            • Year 1 – took $500 deduction for medical expenses<\/li>\n
            • Year 2 – got reimbursed $500 by employer (must count as Gross income)<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n

              If a reimbursement is made in the same year the expense is incurred, the exclusion applies. This is because there has been no deduction with respect to that amount in any “prior taxable year.”<\/p>\n

               <\/p>\n

              Goodwill<\/strong> is an asset that is includable in income<\/p>\n

                \n
              • If the plaintiff generates goodwill, his basis is 0<\/li>\n
              • You can purchase goodwill and the basis would be the amount allocated to goodwill at the time of the purchase.<\/li>\n<\/ul>\n

                 <\/p>\n

                Federal Tax Outline – Page 2<\/a><\/p>\n

                Federal Tax Outline – Page 4<\/a><\/p>\n

                 <\/p>\n

                This Federal Tax Outline is keyed to Fundamentals of Federal Income Taxation, 15 edition, Foundation Press.<\/p>\n