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60 Cards in this Set

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Income from whatever source derived (61(a))
Gross Income
Income that comes from compensation for services, profits from business, investment income and sales of property
Gross Income
Any economic benefit that is a clear accession to wealth over which the taxpayer has dominion and control is gross income.
Broad Judicial Interpretation of Gross Income
True or False. Taxpayers must treat all benefits as gross income unless they can point to a statutory exclusion?
True. Section 101-135 are the exclusions
True or False. An increase in the value of property is not gross income unless it is sold or disposed of by the taxpayer? What is this called?
True. Section 1001
Realization Doctrine
Are loans gross income?
They are not because the amount of borrowed money is offset by the amount of the debt the taxpayer must repay.
Is a forgiven loan or debt gross income?
Yes unless a special rule provides otherwise. Section 61(a)(12) and 108. Treasury Reg. 1.61-12
True or False. Payments made to a third party for the benefit of the taxpayer are gross income?
True.
What is the Claim or Right Doctrine?
If a taxpayer receives a payment under a claim of right the amount MUST be included in gross income even through repaid in a later year. When the amount is repaid in a later year, the taxpayer gets a deduction and may be eligible for special tax calculation to eliminate possible tax bracket differential
What is the Tax Benefit Rule?
If a taxpayer receives repayment of an item taken as a deduction in a previous year then the amount of the repayment is gross income to the extent that the earlier year's deduction actually reduced the taxpayer's income tax
True or False. Except for the rules of inclusion, tax payers have no gross income when they pay less for property than it is worth in an arms length transaction?
True. These bargain may later produce gross income when the tax payer sells the property. Transactions that are not at arms length are not covered by section 83.
True or False. Gains derived from dealings in property are gross income?
True. But only to the extent that the amount of consideration the taxpayer receives exceeds the taxpayer's basis. Treasury Reg. 1.61-6(a)
Is alimony included in gross income?
If it is alimony under section 71(b) then yes it is included in the recipient's gross income.
Is alimony an above the line deduction?
Yes. Section 62(a)(10)
Is child support deductible to the payor? Is it included in gross income?
No it is not a deduction nor counted as gross income. There is no tax consequence or benefit for paying or receiving child support. Section 71(c)(1)
Is all annuities gross income?
No. Only a portion that is not attributable to taxpayer's investment is included in gross income
What is the annuity exclusion ratio?
Annuity Payment X Investment/Expected Return = Excluded Amount
Are prizes and awards included in gross income?
Gross income does include a prize or award unless excluded by rules in Section 74(b)
Is Employer Paid Group Life Insurance included in gross income?
Deemed cost of insurance is included in the employee's gross income to the extent tha the employer pays for more that 50 grand worth of life insurance coverage. If an employer purchases other forms of life insurance and if the employee owns the insurance policy then the cost of the insurance will probably be treated as indirect compensation for the employee
Are employer paid reimbursement of moving expenses included in gross income?
Yes. To the extent that it exceeds the amount that would be deductible by the employee under section 217
Is property transferred for services included in gross income?
Yes, if the taxpayer pays less than the property is worth and receives it in connection with services then the amount of excess value is inlcuded in gross income
Are life insurance and death benefits received by a beneficiary receive included in gross income?
No. They are excluded under Section 101(a)(1). Life insurance benefits received by the purchaser of a life insurance policy bought from an existing owner of a policy has gross income to the extent the benefits paid exceed the amount paid for the policy Section 101(a)(2)
Are gifts and inheritances of property included in gross income?
No they are excluded
Is future income produced by a gift or inheritance of propery excluded as gross income?
No it is included as gross income. Section 102(b).
Is all annuities gross income?
No. Only a portion that is not attributable to taxpayer's investment is included in gross income
Is interest on state and local bonds included in gross income?
No. municipal bond interest is excluded from gross income. Also extends to bonds issued by a federally recognized Indian tribe to fund an essential governmental function
What is the annuity exclusion ratio?
Annuity Payment X Investment/Expected Return = Excluded Amount
Is worker's compensation money included in gross income?
No it is excluded from gross income under Section 104(a)(1)
Are prizes and awards included in gross income?
Gross income does include a prize or award unless excluded by rules in Section 74(b)
Are damages awarded for personal injuries based on a tort like claim included in gross income?
No, it is excluded under Section 104(a)(2)
Are punitive damages included in gross income?
Yes they are included in gross income under Section 104(a)(2)
Is Employer Paid Group Life Insurance included in gross income?
Deemed cost of insurance is included in the employee's gross income to the extent tha the employer pays for more that 50 grand worth of life insurance coverage. If an employer purchases other forms of life insurance and if the employee owns the insurance policy then the cost of the insurance will probably be treated as indirect compensation for the employee
Are employer paid reimbursement of moving expenses included in gross income?
Yes. To the extent that it exceeds the amount that would be deductible by the employee under section 217
Can damages be received in periodic payments?
Yes under Section 104(a)(2)
Is property transferred for services included in gross income?
Yes, if the taxpayer pays less than the property is worth and receives it in connection with services then the amount of excess value is inlcuded in gross income
Are damages for non-physical injuries (ie. emotional distress) included in gross income?
Yes they are included in gross income. Emotional distress is NOT a physical injury
Are life insurance and death benefits received by a beneficiary receive included in gross income?
No. They are excluded under Section 101(a)(1). Life insurance benefits received by the purchaser of a life insurance policy bought from an existing owner of a policy has gross income to the extent the benefits paid exceed the amount paid for the policy Section 101(a)(2)
Are gifts and inheritances of property included in gross income?
No they are excluded
Is future income produced by a gift or inheritance of propery excluded as gross income?
No it is included as gross income. Section 102(b).
Is interest on state and local bonds included in gross income?
No. municipal bond interest is excluded from gross income. Also extends to bonds issued by a federally recognized Indian tribe to fund an essential governmental function
Is worker's compensation money included in gross income?
No it is excluded from gross income under Section 104(a)(1)
Are damages awarded for personal injuries based on a tort like claim included in gross income?
No, it is excluded under Section 104(a)(2)
Are punitive damages included in gross income?
Yes they are included in gross income under Section 104(a)(2)
Can damages be received in periodic payments?
Yes under Section 104(a)(2)
Are damages for non-physical injuries (ie. emotional distress) included in gross income?
Yes they are included in gross income. Emotional distress is NOT a physical injury
Is income from discharge of debts when a client is in bankruptcy or insolvent gross income under §108(a)(1)(A)&(B)?
No
If a student loan is cancelled under terms of the loan is this counted in gross income?
No. §108. After graduation if the loan is paid by the school or other tax except organization to assist graduate to pay for student loans if he or she works in an occupation or area with unmet needs, so long as this payment is made to the recipient as a loan that is later forgiven §108(f)(2)
True/False. Lessor has gross income for his property where the lesee has made improvements?
False
What is the tax benefit rule?
There is no gross income for recovery of previously dedicted itej IF the item produced no tax benefit. If a partial benefit exists then there is a partial inclusion. If there is a full benefit then there is a full inclusion
Are scholarships received for tuition, fees, books, supplies, or equipment excluded as gross income?
Yes, section 117(b)(2)
Are scholarships received that cover room and board excluded from gross income?
No, Section 117(c)
Are scholarships received for teaching or other educational services excluded as gross income?
They are not excluded. Section 117(c)BUT teaching assistants can exclude the value of tuition scholarships Section 117(d)(5)
Are amounts provided by educational institutions for qualified tuition reduction of employee and qualified family members excluded from gross income?
Yes, if they are below the graduate level Section 117(d)(2)
Are employee meals excluded as gross income?
Yes if they are (1) for the convenience of the employer (2)on the business premises
Is employee lodging excluded as gross income?
Yes if they are (1) for the convenience of the employer (2) on the business premises and (3) as a condition of employment
What is the exclusion on joint return on the sale of principal residence if used and owed as such by the taxpayer for two out of the preceding fives years?
500,000 for a joint return or 250,000 for all other returns
Are there any options to the taxpayer for a partial exclusion if they meet only two out of five of the ownership requirements for the exclusion of gain on sale of a principal residence?
Yes Section 121(c)
Is employer provided educational assistance excluded for gross income?
Yes up to 5,250 per year if provided under a written, non-discrimminatory plan for non-recreational education
Can amounts excluded under Section 127 (educational assistance programs) be used for the Hope or Lifetime Learning credit?
No
Is employment paid day care excludable as gross income?
Up to 5,000 per year if the employer has a written plan, the plan does not discriminiate in favor of highly compensated employees