Federal Income Tax and Policy Syllabus Professor Cauble Phone: , Office in Room 704 Fall 2014

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1 Federal Income Tax and Policy Syllabus Professor Cauble Phone: , Office in Room 704 Fall 2014 Course Materials: There are two required books for the course: (1) Bankman, Shaviro, and Stark, Federal Income Taxation 16 th Edition (ISBN: ) (referred to as the Text below) and (2) CCH s Federal Income Tax Code & Regulations: Selected Sections Edition (ISBN: ) (referred to as the Statutory Supplement below). In addition, handouts that are assigned for each class are available on the course page. Description: This course provides an introduction to important topics related to U.S. federal income taxation. The course focuses on federal income tax issues that affect individuals. The course has four main goals: (i) increase knowledge of significant U.S. federal income tax provisions that affect individuals, (ii) increase understanding of major tax policy debates, (iii) improve statutory interpretation skills, and (iv) build a foundational understanding of key tax concepts relevant in advanced tax courses (such as corporate tax, partnership tax, and international tax). Requirements: Students must attend class and be prepared for class. Students should read the assigned material carefully and give thought to the questions and problems contained in the handouts. Computer Usage: Computers may be used in class only for taking notes. I encourage you to also (or instead) bring pen and paper because sometimes it will be helpful to draw diagrams in class. Grading: Each student s preliminary course grade will be based on a three-hour examination that will include short essay questions (similar, in style, to the handout problems and review problems discussed throughout the semester). The exam is open note/open book you may use the Text, the Statutory Supplement, any course handouts, and any notes, outlines or other materials. The school s exam software will prevent you from accessing notes on your computer. Therefore, you should print any materials that you intend to use. Each student s preliminary grade may be adjusted (upwards or downwards) by one-half grade to reflect class attendance and class participation. Course Page: A course page for this class is available on TWEN. Handouts assigned for each class and materials distributed in class are posted on the course page. If you have trouble accessing the course page, please me (ecauble@depaul.edu), and I will send you handouts by until you are able to access the course page. Office Hours: I will have regularly scheduled office hours on Monday from 10:00 11:00, Wednesday from 10:00 11:00, and Thursday from 3:00-4:30. My office is Lewis room 704. In addition, you may me (ecauble@depaul.edu) or stop by my office to arrange for a meeting at a time other than during regularly scheduled office hours. Assignment Schedule: The assignment schedule follows. The amount of material covered per class will likely vary, and I will provide weekly updates with more accurate forecasts about the materials we will cover the following week. Certain problems are assigned for each class. You should be prepared to discuss the answers to the problems in class. Written answers to the problems will not be collected. 1

2 Class Date Topic Assignment August 26, 2014 Introduction Text: 1-8, (through section 4), 19 (starting with 6. Inflation) -21, (through 1. Self Assessment, Audits, and Tax Litigation ), 37 (starting with Section I.)-40. August 28, 2014 September 2, 2014 September 4, 2014 Introductory Considerations & Non-Cash Benefits Employer- Provided Meals and Lodging Other Fringe Benefits Barter Arrangements Assignment One Handout: Questions 1 10 Text: (but skip Example 2 on pages 50 51), (Taxing the Mets Fan) Assignment Two Handout: Questions 1 5 (pages 1-3) Text: (through note (d)) Statutory Supplement: IRC 61(a)(1), 119; Treas. Reg Assignment Two Handout: Questions 6-8 (pages 4 11) Text: 58 (starting with 2. Other Fringe Benefit Statutes) 61 (through Question 4), Note 3 on pages Statutory Supplement: IRC 61(a)(1), 132; Treas. Reg (a)(1)-(5), (c), (e), (a)(1)(iv)(A), Assignment Three Handout: All Questions (pages 1 14) Text: Section 4. Drawing the Line on pages (but skip questions 1 and 2 on page 77) Assignment Four Handout: Questions 1 4 (pages 1 2) Windfalls Text: Exclusion of Gifts Assignment Four Handout: Questions 5 10 (page 3) Text: (but skip note 5 on page 91) Statutory Supplement: IRC 102(a), 102(c)(1), 74(c)(1), 274(j) Assignment Four Handout: Questions (pages 4 7) 2

3 September 9, 2014 Treatment of Prizes, Awards, Scholarships, and Fellowships Statutory Supplement: IRC 74, 117(a) (c) Assignment Four Handout: Questions (pages 8 end) Interlude starting to think Assignment Five Handout: Part I (pages 1 17) about basis September 11, 2014 Interlude Gifts and Basis Assignment Five Handout: Part II (pages 18 26) September 16, 2014 September 18, 2014 September 23, 2014 Interlude Transfers at Death and Basis Recovery of Loss Correcting for mismeasurement that results from annual accounting Damage Awards Transactions Involving Loans and Discharge of Indebtedness Income Interlude: Transactions Involving Loans: Transfer of Property Subject to Debt Assignment Five Handout: Part III (pages 27 29) Text: 122 (starting with 5. Recovery of Loss ) 127 (through note 5) Assignment Six Handout: Part I (pages 1 7) Text: 132 (starting with 2. Claim of Right ) 135 (through Note 3), 136 (starting with Lewis case) 138 (through note 4(a)), 139 (starting with 3. Tax Benefit Rule ) 140 (thru paragraph beginning In illustration, in Alice Phelan ). Statutory Supplement: IRC 1341(a), 1341(b)(1), 111(a) Assignment Six Handout: Part II (pages 8 16) Text: 142 (starting with F. Recoveries for Personal and Business Injuries) 144 (through end of Section 1. The Basic Rules ) Statutory Supplement: IRC 104(a)(2), Treas. Reg. Section (c)(1) Assignment Seven Handout: Part I (pages 1 5) Text: 145 (starting with G. Transactions Involving Loans ) 147 (stop before United States v. Kirby Lumber case) and page 150 (section labeled Misconceived Discharge Theory ) Statutory Supplement: IRC 61(a)(12) Assignment Seven Handout: Part II (pages 6 9). Follow instructions and complete questions in Assignment Eight Handout: Parts I XI (pages 1 9) 3

4 September 25, 2014 Interlude: Transactions Involving Loans: Transfer of Property Subject to Debt (con t) Treatment of Gain From Sale of a Home Follow instructions and complete questions in Assignment Eight Handout: Parts XII XIII (pages 10 end) Text: 191 (starting with J. Gain on the Sale of a Home ) 192 (through note 1) Statutory Supplement: IRC 121(a) 121(c); Treas. Reg (b)(2), (b)(4) Examples 1 and 2, (c)(4) Examples 1, 2, and 3, (a)(4) Examples 1, 2, 3,and 4, (b)(2) Example, (a), (b), (c), (g) Assignment Nine Handout: All Parts September 30, 2014 Review: What is Income? Material to be provided October 2, 2014 October 7, 2014 October 9, 2014 October 14, 2014 Timing: Concept of Realization Timing: Nonrecognition Provisions Timing: Nonrecognition Provisions (con t) Timing: Nonrecognition Provisions (con t) Timing: Cash Method vs. Accrual Method Timing: Review Interlude: Tax and Divorce Text: , 215 (starting with 4. Contemporary Understandings of the Realization Doctrine ) 225 (through end of case). Assignment Ten Handout: All Parts Assignment Eleven Handout: Parts I and II (pages 1 6) Assignment Eleven Handout: Parts III.a. III. d. Example 6 (pages 7 25) Assignment Eleven Handout: Parts III.d.Example 7 Part VIII (pages 26 38) Material Provided in Class Materials to be provided Assignment Twelve Handout: Parts I - III (pages 1-10) (including pages in Text and Code sections to which. 4

5 October 16, 2014 October 21, 2014 Catch-up Note: Class will have to be cancelled on either October 16 th or October 9 th to be determined and announced in September. Interlude: Tax and Divorce (con t) Assignment Twelve Handout: Parts IV VII (pages 11-18) (including pages in Text and Code sections to which. Deductions: Introduction Tax Planning Exercise: Material provided in class. Text: , (section G.) Statutory Supplement: IRC Section 67 Deductions: Casualty Losses Assignment Thirteen Handout: All Parts Text: ( you can stop before discussion of Issue 2 ), Problems 1 and 2 on pages October 23, 2014 Deductions: Casualty Losses (con t) Deductions: Medical Expenses Deductions: Charitable Contributions Statutory Supplement: IRC Sections 165(a), 165(c)(1), 165(c)(2), 165(c)(3), Treas. Reg. Section (a). Assignment Fourteen Handout: Parts I and IIa & b (pages 1 7) Text: Statutory Supplement: IRC Sections 165(a), 165(b), 165(c)(3), 165(h)(1), 165(h)(2), 165(h)(4), 165(h)(5)(A), Treas. Reg. Sections (b)(1) (c), (a). Assignment Fourteen Handout: Part IIc (pages 8 12) Text: 351 (starting with 2. What is Medical Care? ) Statutory Supplement: IRC Sections 213(a), 213(b), 213(d)(1)(A)&(B) Assignment Fourteen Handout: Part III (pages 13 14). Text: (through section b. The Complicitous Role of Some Charitable Organizations ) Statutory Supplement: IRC Sections 170(a)(1), 170(b)(1)(A), 170(b)(1)(G), 170(c) 5

6 October 28, 2014 October 30, 2013 Deductions: Qualified Residence Interest Deductions: Interest on Student Loans Deductions: State and Local Taxes Interlude: Credit for Child and Dependent Care Expenses Deductions: Different Categories of Expenses: Introduction Deductions: When is something a trade or business expense? Deductions: A Trade or Business versus a Hobby Deductions: A Trade or Business versus Mere Investment Activity Assignment Fourteen Handout: Part IV (pages 15 18) Text: (through section 2. Policy Issues ) Statutory Supplement: IRC Sections 163(h)(1), 163(h)(2)(D), 163(h)(3), 163(h)(4)(A) Assignment Fifteen Handout: Part II (pages 1-4) Text: Part 4 on page 380 Assignment Fifteen Handout: Part III (pages 5 6) Text: (Section F. Taxes ) Assignment Fifteen Handout: Part IV (pages 7-8) Text: Notes #4 Statutory Supplement: IRC Sections 21(a), 21(b), 21(c), 21(d)(1) Assignment Fifteen Handout: Part V (pages 9 12) Text: (through the end of the dialogue) Assignment Sixteen Handout: Part I (pages 1 3) Assignment Sixteen Handout: Part II (pages 4 6) (and read the sections in the Code and Regulations to which Text: 393 (starting with A. Controlling the Abuse of Business Deductions ) 398 (through end of case) Statutory Supplement: IRC Sections 183(a), 183(b), 183(c), Treas. Reg. Sections (a), (b) Assignment Sixteen Handout: Part III (pages 7-8) Text: 406 (starting with 3. Income Unconnected to a Trade or Business) 412 (through the end of the case) Statutory Supplement: IRC Sections 212(1) Assignment Sixteen Handout: Part IV (pages 9 10) November 4, 2014 Deductions: Legal Expenses Text: 455 (starting with F. Legal Expenses ) 459 (through end of case) 6

7 Assignment Seventeen Handout: All Parts Deductions: Review Material to be provided November 6, 2014 November 11, 2014 November 13, 2014 November 18, 2014 Mini Unit: Timing of Deductions: Cost Recovery Mini Unit: Timing of Deductions: Depreciation Recapture Review Mini Unit: Timing of Deductions Why Does the Distinction Between Capital and Ordinary Matter? Brief Overview: What is a Capital Asset Policy Rationales Drawing the Distinction between Capital and Ordinary Tax Planning Exercise Drawing the Distinction Between Capital and Ordinary Assignment Eighteen Handout: All Parts (and read pages in Text and sections of Code to which Assignment Nineteen Handout: All Parts (and read pages in Text and sections of Code to which Material to be provided Assignment Twenty Handout: Parts I and II (pages 1 6) (and read pages in Text and Code sections to which. Assignment Twenty Handout: Part III (page 7) (and read pages in the Text and Code sections to which Assignment Twenty Handout: Part IV (page 7) (and read pages in the Text and Handout to which Assignment Twenty-One Handout: All Part (and read pages in the Text and Code sections to which Read and consider the questions in the Tax Planning Exercise Handout posted on the course page. Assignment Twenty-Two Handout: All Part (and read pages in the Text and Code sections to which Material to Be Provided Review November 20, 2014 Splitting of Income Assignment Twenty-Three Handout: All Parts (and read the pages in the Text and Code sections to which Splitting of Income: Review Material to Be Provided November 25, 2014 December 4, 2014 Catch-Up and Review Review 7