Table of Contents. A. Tax Rates and Progressivity...5. B. The Impact of Filing Status...10

Transcription

1 Part I: A First Glance Chapter 1 Applicable Tax Rates...1 A. Tax Rates and Progressivity...5 B. The Impact of Filing Status...10 C. Liability for Tax and the Innocent Spouse Rules...19 Cheshire v. Commissioner Chapter 2 Computing Liability for Tax...29 A. Determining Taxable Income...29 B. Personal Exemptions...40 C. Overview of Deductions...43 D. Overview of Credits...44 (1.) Household and Dependent Care Credit (2.) Higher Education Credits (3.) Credit for Income Taxes Withheld on Wages (4.) Earned Income Credit... 53

2 vi Federal Income Tax A Contemporary Approach Part II: A Closer Look Chapter 3 The Meaning of Gross Income...57 A. Judicial and Administrative Definitions of Income...57 (1.) Defining Gross Income Eisner v. Macomber Commissioner v. Glenshaw Glass Company (2.) Finds Cesarini v. United States (3.) Barter and Imputed Income Revenue Ruling (4.) Illegal Income James v. United States B. Compensation for Services...83 (1.) Payments to Third Parties Old Colony Trust Co. v. Commissioner McCann v. United States United States v. Gotcher (2.) Meals and Lodging Furnished on Employer s Premises Commissioner v. Kowalski Adams v. United States (3.) Statutory Fringe Benefits (4.) Property Received for Services C. Gifts and Bequests Commissioner v. Duberstein Olk v. United States Wolder v. Commissioner Revenue Ruling

3 vii D. Loans and the Cancellation of Debt United States v. Kirby Lumber Co Zarin v. Commissioner E. Gains from Dealings in Property (1.) The Formula for Computing Gain Helvering v. Bruun Philadelphia Park Amusement Co. v. United States (2.) Special Basis Rules (3.) Transfers in Satisfaction of an Obligation United States v. Davis F. An Introduction to the Flavor of Income G. An Introduction to the Timing of Income North American Oil Consolidated v. Burnet Commissioner v. Indianapolis Power & Light Company H. Assignment of Income Lucas v. Earl Teschner v. Commissioner Helvering v. Horst Salvatore v. Commissioner Estate of Stranahan v. Commissioner Commissioner v. Banks Commissioner v. Banaitis Chapter 4 Tax Treatment of Taxpayer Costs A. Introduction B. Expenses versus Capital Expenditures (1.) Costs Related to Tangible Assets Commissioner v. Idaho Power Co Fedex Corp. v. United States Revenue Ruling Midland Empire Packing Company v. Commissioner Mt. Morris Drive-In Theatre Co. v. Commissioner

4 viii Federal Income Tax A Contemporary Approach (2.) Costs Related to Intangible Assets INDOPCO, Inc. v. Commissioner C. Deduction for Expenses (1.) Trade or Business Expenses Welch v. Helvering Jenkins v. Commissioner Exacto Spring Corp. v. Commissioner Estate of Rockefeller v. Commissioner Commissioner v. Groetzinger Commissioner v. Tellier Vitale v. Commissioner (2.) Investment Expenses (3.) Amortization of Start Up Expenses D. Treatment of Capital Expenditures (1.) Depreciation of Tangible Property Simon v. Commissioner Simon v. Commissioner Revenue Procedure (2.) Bonus Depreciation by Election and Limits on Depreciation Deductions (3.) Amortization of Intangible Property Selig v. United States House Report No E. Losses (1.) Business and Investment Losses Miller v. Commissioner (2.) Casualty & Theft Losses Mazzei v. Commissioner Revenue Ruling Carpenter v. Commissioner (3.) Net Operating Losses

5 ix (4.) Loss Limitations a. Transactions With Related Persons b. Limitation on the Deductibility of Capital Losses Chapter 5 Statuory Exclusions From Gross Income A. Annuity and Life Insurance Proceeds B. Scholarships and Fellowships Bingler v. Johnson C. Compensation for Personal Injuries & Sickness Amos v. Commissioner Johnson v. United States Private Letter Ruling Murphy v. Internal Revenue Service D. Other Exclusion Provisions Chapter 6 Timing A. The Cash Method (1.) Income Items Hornung v. Commissioner Davis v. Commissioner Veit v. Commissioner Veit v. Commissioner Cowden v. Commissioner (2.) Deduction Items Commissioner v. Boylston Market Association Zaninovich v. Commissioner Grynberg v. Commissioner B. The Accrual Method (1.) Income Items Revenue Ruling Spring City Foundry Co. v. Commissioner

6 x Federal Income Tax A Contemporary Approach Clifton Manufacturing Co. v. Commissioner Flamingo Resort, Inc. v. United States Schlude v. Commissioner Artnell Company v. Commissioner Tampa Bay Devil Rays, Ltd. v. Commissioner Revenue Procedure (2.) Deduction Items Gold Coast Hotel & Casino v. United States United States v. Consolidated Edison Co. of New York, Inc C. The Taxable Year Burnet v. Sanford & Brooks Co United States v. Lewis D. Error Correction (1.) The Tax Benefit Rule Alice Phelan Sullivan Corporation v. United States Unvert v. Commissioner Hillsboro National Bank v. Commissioner United States v. Bliss Dairy, Inc (2.) Restoration of a Claim of Right Reynolds Metals Co. v. United States United States v. Skelly Oil Co (3.) Other Correction Devices Commissioner v. Sunnen United States v. Dalm Chapter 7 Flavor A. Capital Assets Byram v. United States Corn Products Refining Co. v. Commissioner Arkansas Best Corporation v. Commissioner Womack v. Commissioner B. The Sale or Exchange Requirement Kenan v. Commissioner

7 xi C. The Preferential Rates for Long-Term Capital Gains (And Qualified Dividend Income) D. Section 1231 Gains And Losses E. Depreciation Recapture Chapter 8 Transactions in Property A. The Impact of Debt Relief on Amount Realized Crane v. Commissioner Commissioner v. Tufts Woodsam Associates, Inc. v. Commissioner Estate Of Franklin v. Commissioner Pleasant Summit Land Corp. v. Commissioner Revenue Ruling B. Tax Aspects Of Home Ownership C. Like-Kind Exchanges Revenue Ruling D. Involuntary Conversions Revenue Ruling Revenue Ruling E. Installment Sale Method Overview of Issues Relating to the Modification of the Installment Sales Rules by the Ticket to Work and Work Incentives Improvement Act of Burnet v. Logan Chapter 9 Personal Matters Estimates of Federal Tax Expenditures for Fiscal Years A. Extraordinary Medical Expenses Revenue Ruling Revenue Ruling Revenue Ruling Revenue Ruling Revenue Ruling

8 xii Federal Income Tax A Contemporary Approach B. Charitable Contributions Hernandez v. Commissioner Sklar v. Commissioner Revenue Ruling C. Taxes D. Tax Aspects of Supporting a Family E. Tax Aspects of Divorce and Separation Gould v. Gould Okerson v. Commissioner United States v. Davis Revenue Ruling Kochansky v. Commissioner United States v. Gilmore F. Bad Debts and Worthless Securities Bugbee v. Commissioner Whipple v. Commissioner Chapter 10 Dual-Purpose Expenses A. Travel B Commissioner v. Flowers Revenue Ruling United States v. Correll Hantzis v. Commissioner Entertainment Expenses and Business Meals Moss v. Commissioner Churchill Downs v. Commissioner C. Job Seeking Expenses and Moving Expenses Revenue Ruling D. Education Expenses Wassenaar v. Commissioner Galligan v. Commissioner Warren v. Commissioner Sharon v. Commissioner

9 xiii E. Home Office and Vacation Home Expenses F. Clothing Expenses Pevsner v. Commissioner Nicely v. Commissioner Part III: Tax Shelter & Tax Avoidance Chapter 11 Tax Shelter and Tax Avoidance Limitations A. Hobby Activities Prieto v. Commissioner B. At Risk Rules General Explanation of the Tax Reform Act of C. Passive Activity Losses General Explanation of the Tax Reform Act of D. Alternative Minimum Tax Appendix 1 Estimates of Federal Tax for Expenditures, Fiscal Years Appendix 2 Excerpt from Revenue Procedure Appendix 3 Answers to Self-Assessment Questions...963