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10 Cards in this Set
- Front
- Back
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IRC Sect. 61(a) - Gross Income
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General definition - Except as otherwise provided in this subtitle, gross income means all income FROM WHATEVER SOURCE DERIVED, including (but not limited to) the following items. The code then gives 15 examples.
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IRC Sect. 61(b) - Gross Income
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For items specifically included in gross income, see part II (sec. 71 and following). For items specifically excluded from gross income, see part III (sec. 101 and following).
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What are the objectives associated with our tax system?
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1. Raise revenue
2. Assist fiscal policy. IOW, increase or decrease the spending power of individuals for some economic reason. 3. Affect income and wealth distribution. Although currently, the taxation rates are not very progressive, meaning that lower incomes are paying a greater percentage of their income. |
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Tax rate terms
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1. Statutory rate - taxation rate directly from the code
2. Effective rater - economist concept. The amount of money generated by a transaction divided by the additional tax payable because of it. 3. Marginal rate - what is the NEXT dollar going to be taxed at. IOW will making one more dollar cause an increase in tax bracket or is it "free" |
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What are the three policy issues that we have to consider in tax law?
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1. Equity/equitable - both horizontal and vertical. Horizontal is similarly situated TP's should pay same. Vertical is determining the fair spread when differently situated TP's are paying different amounts.
2. Efficiency - taxes affect resources and outcomes. Ex. mortgage interest deductions have lead to purchase of larger homes. In essence, a government subsidy. 3. Simplicity - cost of compliance with our tax system. Are there ways to reduce transaction costs. |
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Beginning vocabulary
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AGI - above the line deductions (see 1040)
Where is the Line Difference between deduction and credit Tax base Alternative base BTL - below the line 3 kinds of tax rates 3 kinds of policy issues |
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Where does Congress get the power to tax?
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Article 1, section 8 (limited by 9)
16th Amendment - allows income tax without having to apportion amongst the states. |
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Statutes that define our tax system
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Internal Revenue Code - IRC
Treasury Regulations - TR There are also rulings within the IRS, though these are not necessarily consistent. |
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Private Letter Ruling
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A TP, prior to engaging in a transaction, can submit it to the IRS. The IRS then rules in advance. Although it becomes public, the identification is removed. It can't be used as precedence, but gives the TP an idea of what the IRS thinks.
The IRS will not rule on some things. For instance, the value of something. |
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The 3 places that you can go to if you think the IRS made a mistake
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1. Tax Court (don't have to pay in advance, no jury trial)
2. Federal District Courts of the district you are in (have to pay then sue for a refund. Jury trial available) 3. Court of Claims (have to pay and sue for a refund. No jury trial available) |
