364254273-Attack-Short-Sheet

Attack/Short Sheet for Income Tax GROSS INCOME Under§61(a), GI means all income from whatever source derived, UNLESS there is an exclusion (Reg 1.61-1(a)) Glenshaw Glass3 Part Test: (1) Undeniable accession of wealth, (2) Clearly realized, &(3) Complete control oAccession of Wealth: Not mere return of capital and NOT accompanied by obligation to repay oRealization Event: an objective, identifiable event MUST take place =something different after the event than before Recognized, UNLESS otherwise excepted (e.g., transfer to spouse§1041,OR gift (§ 1015) (1) Sale; (2) exchange; (3) foreclosure; (4) transfer deed (in lieu of #3); (5) finding property GI = What's in§61(a)and what's included specifically in§§ 71-86, BUT does NOT include what's excluded in§§ 101-139 oNo GI if mere return of capital w/ contemporaneously acknowledged obligation to repay (BUT stolen $$ = GI)  Comp. for Services - INCLUSION§61(a)(1)/Reg. 1.61-2(d)(1)-FMV of property received as comp. is included in GI Found Property -- INCLUSION oFinding property is a realization event; GI includesTreasure Trove (Reg § 1.61-14(a)) @ time of undisputed possession(Cessarini) -> Rule: S/L = 3 years; Except: large sum NOT included= 6 years; NO file or fraud = No S/L oInclude property's FMV (or cash) in GI, and the amount included in GI is your Tax-Cost Basis (BR #3) COD Income - INCLUSION oAny discharged debt for which TP was liable, OR subject to TP's property is included in GI( § 61(a)(12), UNLESS: Excluded by§ 108(Bankruptcy or Insolvency), OR debt is1)forgiven,2)Worked off, or3)paid non-cash Discharge of an Obligation by a Third Party - INCLUSION(Old Colony Trust Co.) oDischarge of an obligation by a third party, including another's payment of the TP's taxes = GI (Reg § 1.61-14(a)) Prizes & Awards - INCLUSION o§ 74- Prizes & Awards are includible in GI EXCEPTION # 1: Award received(1)in recognition of relig., charitable, scientific, educational, artistic, literary, or civic achievement areexcludibleIF:(2)TP selected w/o any action on his part to enter contest; (3)TP is not required to perform future services as condition of receiving award; and(4)the prize/award is transferred by thegiver of the awardto a (a)gov't unitOR (b) entity operated exclusively forreligious, charitable, scientific, literary, or educationalpurposes; or (c)NCAA; or (d)501(c)(3)non-profit EXCEPTION # 2:(c)Awards to EE for(1)length of serviceor(2)safety achievementNOT included in GI Rents; Royalties; Windfalls; Illegal Income- INCLUSION (stolen $$ = GI; not loan, even if you have to pay it back) Dividends - Include in Net Capital Gain Property Subject to Substantial Risk of Forfeituremay elect either to: o(1) Include in O.I. Now (in year of receipt)amount included is value at time of receipt minus amount paid if any§83(b) o(2) Include in O.I. Later (when property vests & is transferable or no longer subject to risk of forfeiture)amount included is value at time of vesting minus amount paid if any§83(a) HAIG-SIMMONS INCOME(conceptual tax policy done by economists, not adopted by law) H/S Income = FMV of Consumption + Net change in Assets Imputed income is ONLY included in GI under Haig/Simmons; GI is what is consumed No realization doctr. in H/SAppreciation/depreciation in assets would affect GI each year, even if NOT sold/disposed. EXCLUSIONS Under§61(a), GI means all income from whatever source derived, UNLESS there is an exclusion (Reg 1.61-1(a)) Gift§ 102(a)- EXCLUSION oTransferorintendsdetached/disinterested generosity (Duberstein)ORcomp. for servicesunder§61(a)? Gifts are excluded from donee's GI§ 102(a)look to§ 1015for transferred basis rule NO gifts in ER/EE relationship(§102(c)),but see§132&§74(c)-Exception for certain EE awards § 274(b):deduction for gifts to individuals (non-EE) as business exp. limited to $25 per donee/yr. Part-Gift/Part-SaleAll Gain & BasisSale;Gift -- EXCLUSION oWhen property encumbered with a mortgage is gifted, it is a part sale/part gift transaction oAmount of mortgage is the sale component, the difference between the mortgage and the FMV is the gift component View this transaction as a sale first, then any excess treated as a gift For transferor, entire AB allocated to sale; NOT divided btw sale & gift -Reg. 1.1001-1(e)(1) However, if transferee were a charitable organization, the AB would be split btw gift & sale.The transferor MUST be taxed at disposition because otherwise the taxes would be lost since the charitable organization does not pay taxes(Reg. 1.1011-2) oTransferor CANNOT realize alosson a part sale/part gift transaction(Reg. 1.1001-1(e)(1)) Interest on State & Local Bonds - EXCLUSION o§103- GI does NOT include interest on any State or Local bond Receipts Related to Physical Injury or Sickness Damages / Workers' Comp-- EXCLUSION oUnder§104(a), NO GI for damages (NOT punitive damages) received bc of personal injuries or physical sickness Emotional distress or Back-Pay is generally NOT treated as a personal injury or physical sickness UNLESS it's linked w/ such injury/sickness, then isexcludiblefrom GI (§104 Flush language) Amount paid for medical care attributable to emotional distress isexcludible(§104 Flush language)