235541789-Tobin-Federal-Income-Tax-Outline

Federal Income Tax Outline Fall 2005 Table of Contents Table of Contents..........................................................................................................................................................1 Abbreviations in This Outline......................................................................................................................................3 I. Overview of Income Tax System..............................................................................................................................4 A. Sources of Tax Law..............................................................................................................................................4 B. Tax Litigation........................................................................................................................................................4 C. Steps in Computing Taxable Income..................................................................................................................5 II. Ethics.........................................................................................................................................................................5 A. Standards for Tax Attorneys...............................................................................................................................5 1. ABA Formal Opinion 85-352............................................................................................................................5 2. IRS Circular 230 - Best Practices and Other Standards (31 C.F.R. § 10.34)..............................................5 3. Section 6694.......................................................................................................................................................6 B. Standards for Taxpayers......................................................................................................................................6 III. The Scope of Gross Income...................................................................................................................................6 A. Cash Receipts: Does Source Matter?.................................................................................................................6 1. Generally, No.....................................................................................................................................................6 2. Tax-Free Recovery of Capital is Allowed........................................................................................................7 3. Statutory Exclusions (Congress Says Source Matters)..................................................................................7 B. Is it taxable if it isn't cash?..................................................................................................................................9 1. Generally, Yes, as far as § 61 is concerned......................................................................................................9 2. Two Great Non-Statutory Exclusions of Non-Cash Economic Benefits....................................................10 3. Statutory Exclusions Based on the Non-Cash Nature of the Benefit.........................................................10 4. De Facto Administrative Exclusion - Frequent Flier Miles: CB 213-221..................................................14 C. Income Inclusions as Mistake-Correcting Devices.........................................................................................14 1. The Annual Tax Accounting Period...............................................................................................................14 2. Loans and Cancellation of Indebtedness......................................................................................................14 3. The Tax Benefit Rule......................................................................................................................................17 IV. Property Transactions..........................................................................................................................................17 A. The Realization Doctrine...................................................................................................................................17 1. Eisner v. Macomber........................................................................................................................................18 2. Unrealized Appreciation, Stock Dividends vs. Cash Dividends..................................................................18 3. The Constitutional Issue.................................................................................................................................18 B. Manipulation of the Realization Rules.............................................................................................................18 1. The Substance of a Sale without Realization of Gain..................................................................................19 2. The Substance of Continued Ownership with Realization of Loss............................................................19 3. "Cherry Picking" - § 1211 Capital Loss Limitations..................................................................................19 C. Nonrecognition: CB 269....................................................................................................................................19 1. The concept of nonrecognition.......................................................................................................................19 2. Like-Kind Exchanges: CB 272; HB 220........................................................................................................19 3. Involuntary Conversions (§ 1033): CB 277; HB 237...................................................................................20 4. Permanent Exclusion of Gain on the Sale of a Principal Residence..........................................................20 D. Installment Sales................................................................................................................................................21 E. Annuities..............................................................................................................................................................21 F. Basis Rules for Property Transferred by Gift or Bequest...............................................................................22 1. Property Transferred by Inter Vivos Gift.....................................................................................................22 2. Property Transferred at Death......................................................................................................................22 3. Part Gift, Part Sale Transactions...................................................................................................................22 G. BasisAllocation: Piecemeal Asset Dispositions and Other Contexts: CB 294..............................................22 IV. Personal Deductions..............................................................................................................................................23 A. Charitable Contributions (§ 170): CB 356; HB 519........................................................................................23 1. The Rationale..................................................................................................................................................23 2. The Amount of the Deduction........................................................................................................................23 3. Eligible Recipients...........................................................................................................................................24