{"id":985,"date":"2012-07-21T08:14:16","date_gmt":"2012-07-21T12:14:16","guid":{"rendered":"http:\/\/www.miblaw.com\/lawschool\/?p=985"},"modified":"2012-07-21T09:27:23","modified_gmt":"2012-07-21T13:27:23","slug":"federal-tax-outline-1","status":"publish","type":"post","link":"http:\/\/www.miblaw.com\/lawschool\/federal-tax-outline-1\/","title":{"rendered":"Federal Income Tax Outline – Page 1 Gross Income"},"content":{"rendered":"

Chapter 1<\/h1>\n

Power to Tax<\/h3>\n

Article 1, Section 8, Clause 1<\/strong><\/p>\n

Very extensive power with two constitutional limitations:<\/p>\n

    \n
  1. Direct taxes must be imposed by the rule of apportionment among the several states in accordance with their respective populations<\/li>\n
  2. Indirect taxes by the rule of uniformity \u2013 geographic<\/li>\n<\/ol>\n

    16th<\/sup> Amendment<\/strong><\/p>\n

    \u2013\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u201cfrom whatever source derived\u201d<\/em><\/p>\n

    Courts<\/h3>\n

    Tax Court<\/strong> \u2013 no jury<\/p>\n

    District Court of Appeals<\/strong> \u2013 jury or non-jury; must pay a fee<\/p>\n

    \u2013\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 You can start in either court. Consider precedent\/jury\/fee<\/p>\n

     <\/p>\n

    Statute of Limitations<\/h3>\n
      \n
    • 3 years is normal<\/li>\n
    • 6 years if you omit 25% of your gross income<\/li>\n
    • Infinity if fraud or no file<\/li>\n<\/ul>\n

       <\/p>\n

      Gross Income<\/h1>\n

      Section 61<\/p>\n

      Gross income includes the receipt of any financial benefit which is:<\/p>\n

        \n
      1. Not a mere return of capital, and<\/li>\n
      2. Not accompanied by a contemporaneously acknowledged obligation to repay, and<\/li>\n
      3. Not excluded by a specific statutory provision<\/li>\n<\/ol>\n

        Income is realized whenever there are “instances of:<\/p>\n

          \n
        1. undeniable accessions to wealth,<\/li>\n
        2. clearly realized, and<\/li>\n
        3. over which the taxpayers have complete dominion.”<\/li>\n<\/ol>\n

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

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

          Cesarini v. United States<\/em><\/strong><\/em><\/h3>\n

          Money found in an used piano; section 61 is broad, all-inclusive; treasure trove is included in GI to the extent of its value in US currency*<\/em><\/em><\/p>\n

          Old Colony Trust Co. v. Commissioner<\/em><\/h3>\n

          Corporation agreed to pay income tax of directors; the taxes were paid based on the employees services to the employer<\/em><\/em><\/em><\/strong><\/p>\n

          Commissioner v. Glenshaw Glass Co.<\/em><\/strong><\/h3>\n

          <\/em><\/strong> Exemplary\/punitive damages are included in GI; compensatory damages are not GI because they return the individual to his original place<\/em><\/em><\/em><\/p>\n

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

          Travel credits converted to cash; the taxpayer was wealthier from the sale of the travel credits = GI<\/em><\/p>\n

          *Fair market value: willing buyer, willing seller, neither of whom is under unusual compulsion<\/p>\n

           <\/p>\n

          Gross Income (GI)<\/p>\n

          – (Deductions Toward AGI)<\/p>\n

          = Adjusted Gross Income (AGI)<\/p>\n

          – (Deductions From AGI)<\/p>\n

          = Taxable Income<\/p>\n

          (Credits)<\/p>\n

          __________________________<\/p>\n

          Amount Realized<\/p>\n

          – (Adjusted Basis)<\/span><\/p>\n

          = Gain Realized<\/span><\/p>\n

          Gain Recognized*<\/p>\n

          *Gain recognized is the full amount of Gain Realized unless some other Code section states that it is not recognized.<\/p>\n

           <\/p>\n

          Income is taxable from both legal and illegal sources – “The wages of sin are not exempt from taxation.”<\/p>\n

          In order to have an Amount Realized: Must have a sale<\/strong> or an exchange<\/strong><\/p>\n

           <\/p>\n

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

           <\/p>\n

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

           <\/p>\n