Fundamentals Of Income Tax

Front 1

Gains and loses computation from the “sale or other disposition of property”—§1001(a)

Back 1

Amount Realized (AR) – Adjusted Basis/Tax Investment (AB) = taxable gain or deductible loss

Front 2

IRA §61- Gross Income

Back 2

“all income from whatever source derived”

Front 3

Glenshaw Glass- Gross Income

Back 3

“undeniable accessions to wealth, clearly realized and over which the taxpayer has complete dominion"

Front 4

§1012 Basis

Back 4

basis of property shall be the cost of such property
-cost: cash paid, FMV of property traded

Front 5

§ 1016. Adjustments to basis “Adjusted Basis”

Back 5

The net cost of an asset after adjusting for various tax-related items (e.g. Appreciation/depreciation).

Front 6

Define "Tax Expenditure"

Back 6

Tax expenditure = the tax revenue lost because of a tax exemption.

Front 7

Define "Putative Tax"

Back 7

Putative tax = the difference between the investment returns on comparable taxable and tax-exempt investments.

Front 8

Define "Deadweight Costs"

Back 8

Deadweight cost = the excess, if any, of the tax expenditure over the putative tax.

Front 9

Define "Realization" "Disposition"

Back 9

Occurs when property is sold, exchanged, or otherwise transferred for materially different property. §1001(b)

Front 10

Define "Recognition"

Back 10

Income is recognized as taxable once it becomes realized. §1001(a). May be gain or loss.

Hint 10

$5 car (adjusted basis) exchanged for $6 land (amount realized) results in $1 realized gain. $1 recognized as income.

Front 11

Define "Basis"

Back 11

Basis= The value of TP's investment in acquiring property. §1012

Hint 11

Tom pays $5,000 for car. He has $5,000 basis in the car.

Front 12

Define "Cost Basis"

Back 12

Cost Basis: TP acquires property in exchange for....
Cash= Cash
Property= FMV of property
Services= FMV of services

Hint 12

TP trades $5K car for $6K land.

Front 13

Define "Adjusted Basis"

Back 13

TP's basis may increase/decrease in connection to property's appreciation/depreciation.

Front 14

Define "Sale"

Back 14

Sale= a transfer of property for cash (or the assumption of liabilities).

Front 15

Define "Exchange"

Back 15

Exchange= transfer of property for non-cash property that differs materially in kind or extent from the property transferred.