intro to tax school - university of...
TRANSCRIPT
© Steven J. Willis 2008. All Rights Reserved. 1
Survey of Income Tax Slides
50 IMPORTANT FORMSNAVIGATION INSTRUCTIONSTAX HUMORINDEX
SURVEY OF INCOME TAX SLIDES(WITHOUT NARRATION)
TOP 100 TAX TERMS
TOP 100 TAX CASES
ON-LINE TAX AUTHORITIES
BRIEF HISTORY
TOP 40 TAX DOCTRINES
OFFICIAL TAX AUTHORITIES
CODE STRUCTURE
TOP 100 SECTIONS
TAX LL.M. PROGRAMS
COURT SYSTEM
TAX ETHICS
5 SUGGESTED READINGS
INTRODUCTION TO TAX SCHOOL
© Steven J. Willis 2008. All Rights Reserved.
© Steven J. Willis 2008. All Rights Reserved. 2
Survey of Income Tax Slides
Most, if not all, tax matters involve five issues:
© Steven J. Willis 2008. All Rights Reserved. 3
Survey of Income Tax Slides
IssuesIssues
Most, if not all, tax matters involve five issues:
© Steven J. Willis 2008. All Rights Reserved. 4
Survey of Income Tax Slides
WhetherWhether
IssuesIssues
Most, if not all, tax matters involve five issues:
© Steven J. Willis 2008. All Rights Reserved. 5
Survey of Income Tax Slides
WhetherWhether
WhenWhen
IssuesIssues
Most, if not all, tax matters involve five issues:
© Steven J. Willis 2008. All Rights Reserved. 6
Survey of Income Tax Slides
WhetherWhether
WhenWhen
WhoWhoIssuesIssues
Most, if not all, tax matters involve five issues:
© Steven J. Willis 2008. All Rights Reserved. 7
Survey of Income Tax Slides
WhetherWhether
WhenWhen
WhoWho
How MuchHow Much
IssuesIssues
Most, if not all, tax matters involve five issues:
© Steven J. Willis 2008. All Rights Reserved. 8
Survey of Income Tax Slides
WhetherWhether
WhenWhen
WhoWho
How MuchHow Much
CharacterCharacter
IssuesIssues
Most, if not all, tax matters involve five issues:
© Steven J. Willis 2008. All Rights Reserved. 9
Survey of Income Tax Slides
WhetherWhether
WhenWhen
WhoWho
How MuchHow Much
CharacterCharacter
IssuesIssuesEach issue
applies both to income and
deductions.
© Steven J. Willis 2008. All Rights Reserved. 10
Survey of Income Tax Slides
WhetherWhether
WhenWhen
WhoWho
How MuchHow Much
CharacterCharacter
IssuesIssuesEach issue
applies both to income and
deductions.
income
income
income
income
income
© Steven J. Willis 2008. All Rights Reserved. 11
Survey of Income Tax Slides
WhetherWhether
WhenWhen
WhoWho
How MuchHow Much
CharacterCharacter
IssuesIssuesEach issue
applies both to income and
deductions.
income
income
income
income
income
© Steven J. Willis 2008. All Rights Reserved. 12
Survey of Income Tax Slides
WhetherWhether
WhenWhen
WhoWho
How MuchHow Much
CharacterCharacter
IssuesIssuesEach issue
applies both to income and
deductions.
deduction
income
deduction
income
deduction
income
deduction
income
deduction
income
© Steven J. Willis 2008. All Rights Reserved. 13
Survey of Income Tax Slides
WhetherWhether
WhenWhen
WhoWho
How MuchHow Much
CharacterCharacter
IssuesIssues
Whether a particular transaction or event is sufficient to produce
income or a deduction.
© Steven J. Willis 2008. All Rights Reserved. 14
Survey of Income Tax Slides
WhetherWhether
WhenWhen
WhoWho
How MuchHow Much
CharacterCharacter
IssuesIssues
When (which year) is the income to be reported or the
deduction taken?
© Steven J. Willis 2008. All Rights Reserved. 15
Survey of Income Tax Slides
WhetherWhether
WhenWhen
WhoWho
How MuchHow Much
CharacterCharacter
IssuesIssues Who’s income or deduction is it?
© Steven J. Willis 2008. All Rights Reserved. 16
Survey of Income Tax Slides
WhetherWhether
WhenWhen
WhoWho
How MuchHow Much
CharacterCharacter
IssuesIssues
How much income or deduction is
involved?
© Steven J. Willis 2008. All Rights Reserved. 17
Survey of Income Tax Slides
WhetherWhether
WhenWhen
WhoWho
How MuchHow Much
CharacterCharacter
IssuesIssues
What is the character of the
income or deduction?
© Steven J. Willis 2008. All Rights Reserved. 18
Survey of Income Tax Slides
WhetherWhether
WhenWhen
WhoWho
How MuchHow Much
CharacterCharacter
IssuesIssues Each issue has sub-issues.
deduction
income
deduction
income
deduction
income
deduction
income
deduction
income
© Steven J. Willis 2008. All Rights Reserved. 19
Survey of Income Tax Slides
WhetherWhether
WhenWhen
WhoWho
How MuchHow Much
CharacterCharacter
IssuesIssues
deduction
income
deduction
income
deduction
income
deduction
income
deduction
income
© Steven J. Willis 2008. All Rights Reserved. 20
Survey of Income Tax Slides
WhetherWhether deduction
income
© Steven J. Willis 2008. All Rights Reserved. 21
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
© Steven J. Willis 2008. All Rights Reserved. 22
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
© Steven J. Willis 2008. All Rights Reserved. 23
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
ExcludedExcluded
© Steven J. Willis 2008. All Rights Reserved. 24
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
ExcludedExcluded
© Steven J. Willis 2008. All Rights Reserved. 25
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
ExcludedExcluded
© Steven J. Willis 2008. All Rights Reserved. 26
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
© Steven J. Willis 2008. All Rights Reserved. 27
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
© Steven J. Willis 2008. All Rights Reserved. 28
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
Each issue has sub-issues.
© Steven J. Willis 2008. All Rights Reserved. 29
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
© Steven J. Willis 2008. All Rights Reserved. 30
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 61§ 61
© Steven J. Willis 2008. All Rights Reserved. 31
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 61§ 61
§ 1001(c)§ 1001(c)
© Steven J. Willis 2008. All Rights Reserved. 32
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 61§ 61
§ 1001(c)§ 1001(c)
You should know these code sections.The
following slides briefly discuss them.
Each section is on the Top 100 List.
You should know these code sections.The
following slides briefly discuss them.
Each section is on the Top 100 List.
© Steven J. Willis 2008. All Rights Reserved. 33
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 61§ 61
§ 1001(c)§ 1001(c)
© Steven J. Willis 2008. All Rights Reserved. 34
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 61§ 61
§ 1001(c)§ 1001(c)
“Gross income means all income
from whatever source derived.”
“Gross income means all income
from whatever source derived.”
© Steven J. Willis 2008. All Rights Reserved. 35
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 61§ 61
§ 1001(c)§ 1001(c)
See, Eisner v. Macomber, 252 U.S. 189
(1920) and Glenshaw Glass, 348 U.S. 426
(1955) for the meaning of this phrase.
See, Eisner v. Macomber, 252 U.S. 189
(1920) and Glenshaw Glass, 348 U.S. 426
(1955) for the meaning of this phrase.
“Gross income means all income
from whatever source derived.”
“Gross income means all income
from whatever source derived.”
© Steven J. Willis 2008. All Rights Reserved. 36
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 61§ 61
§ 1001(c)§ 1001(c)
These cases are on the
top 100 list.
These cases are on the
top 100 list.
“Gross income means all income
from whatever source derived.”
“Gross income means all income
from whatever source derived.”
See, Eisner v. Macomber, 252 U.S. 189
(1920) and Glenshaw Glass, 348 U.S. 426
(1955) for the meaning of this phrase.
See, Eisner v. Macomber, 252 U.S. 189
(1920) and Glenshaw Glass, 348 U.S. 426
(1955) for the meaning of this phrase.
© Steven J. Willis 2008. All Rights Reserved. 37
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 61§ 61
§ 1001(c)§ 1001(c)
© Steven J. Willis 2008. All Rights Reserved. 38
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 61§ 61
§ 1001(c)§ 1001(c)
“The entire amount of the
gain or loss . . . on the sale or exchange of
property shall be recognized.”
“The entire amount of the
gain or loss . . . on the sale or exchange of
property shall be recognized.”
© Steven J. Willis 2008. All Rights Reserved. 39
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
© Steven J. Willis 2008. All Rights Reserved. 40
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 351§ 351
© Steven J. Willis 2008. All Rights Reserved. 41
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 351§ 351
§ 721§ 721
© Steven J. Willis 2008. All Rights Reserved. 42
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 1031§ 1031
§ 351§ 351
§ 721§ 721
© Steven J. Willis 2008. All Rights Reserved. 43
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 1031§ 1031
§ 1033§ 1033
§ 351§ 351
§ 721§ 721
© Steven J. Willis 2008. All Rights Reserved. 44
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 1031§ 1031
§ 1033§ 1033
§ 1041§ 1041
§ 351§ 351
§ 721§ 721
© Steven J. Willis 2008. All Rights Reserved. 45
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 1031§ 1031
§ 1033§ 1033
§ 1041§ 1041
§ 351§ 351
§ 721§ 721
You should know these code sections.The
following slides briefly discuss them.
Each section is on the Top 100 List.
You should know these code sections.The
following slides briefly discuss them.
Each section is on the Top 100 List.
© Steven J. Willis 2008. All Rights Reserved. 46
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 1031§ 1031
§ 1033§ 1033
§ 1041§ 1041
§ 351§ 351
§ 721§ 721
“No gain or loss shall be recognized if property is
transferred to a corporation . . . solely in exchange for stock in such corporation and immediately after the exchange such person or persons are in control.”
“No gain or loss shall be recognized if property is
transferred to a corporation . . . solely in exchange for stock in such corporation and immediately after the exchange such person or persons are in control.”
© Steven J. Willis 2008. All Rights Reserved. 47
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 1031§ 1031
§ 1033§ 1033
§ 1041§ 1041
§ 351§ 351
§ 721§ 721
“No gain or loss shall be recognized to a partnership or to any of its partners in
the case of a contribution of property to the partnership in exchange for an interest
in the partnership.”
“No gain or loss shall be recognized to a partnership or to any of its partners in
the case of a contribution of property to the partnership in exchange for an interest
in the partnership.”
© Steven J. Willis 2008. All Rights Reserved. 48
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 1031§ 1031
§ 1033§ 1033
§ 1041§ 1041
§ 351§ 351
§ 721§ 721
“No gain or loss shall be recognized on the exchange
of property held for productive use in a trade or business or for investment if such property is exchanged
solely for property of like kind which is to be held
either for productive use in a trade or business or for
investment.”
“No gain or loss shall be recognized on the exchange
of property held for productive use in a trade or business or for investment if such property is exchanged
solely for property of like kind which is to be held
either for productive use in a trade or business or for
investment.”
© Steven J. Willis 2008. All Rights Reserved. 49
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 1031§ 1031
§ 1033§ 1033
§ 1041§ 1041
§ 351§ 351
§ 721§ 721
This section provides for non-recognition of gain on the involuntary conversion of property
into similar use property.
This section provides for non-recognition of gain on the involuntary conversion of property
into similar use property.
© Steven J. Willis 2008. All Rights Reserved. 50
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 1031§ 1031
§ 1033§ 1033
§ 1041§ 1041
§ 351§ 351
§ 721§ 721
This section provides for non-recognition of
gain or loss on the transfer of property between spouses or incident to divorce.
This section provides for non-recognition of
gain or loss on the transfer of property between spouses or incident to divorce.
© Steven J. Willis 2008. All Rights Reserved. 51
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
© Steven J. Willis 2008. All Rights Reserved. 52
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 71(c)§ 71(c)
© Steven J. Willis 2008. All Rights Reserved. 53
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 71(c)§ 71(c)
§ 102§ 102
© Steven J. Willis 2008. All Rights Reserved. 54
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 103§ 103
§ 71(c)§ 71(c)
§ 102§ 102
© Steven J. Willis 2008. All Rights Reserved. 55
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 103§ 103
§ 71(c)§ 71(c)
§ 102§ 102
§ 104§ 104
© Steven J. Willis 2008. All Rights Reserved. 56
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 103§ 103
§ 71(c)§ 71(c)
§ 102§ 102
§ 104§ 104
§ 106§ 106
© Steven J. Willis 2008. All Rights Reserved. 57
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 103§ 103
§ 71(c)§ 71(c)
§ 102§ 102
§ 104§ 104
§ 106§ 106
§ 108§ 108
© Steven J. Willis 2008. All Rights Reserved. 58
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 103§ 103
§ 71(c)§ 71(c)
§ 102§ 102
§ 104§ 104
§ 106§ 106
§ 115§ 115
§ 108§ 108
© Steven J. Willis 2008. All Rights Reserved. 59
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 103§ 103
§ 71(c)§ 71(c)
§ 102§ 102
§ 104§ 104
§ 106§ 106
§ 117§ 117
§ 115§ 115
§ 108§ 108
© Steven J. Willis 2008. All Rights Reserved. 60
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 103§ 103
§ 71(c)§ 71(c)
§ 102§ 102
§ 104§ 104
§ 106§ 106
§ 117§ 117
§ 121§ 121
§ 115§ 115
§ 108§ 108
© Steven J. Willis 2008. All Rights Reserved. 61
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 103§ 103
§ 71(c)§ 71(c)
§ 102§ 102
§ 104§ 104
§ 106§ 106
§ 117§ 117
§ 121§ 121
§ 115§ 115
§ 108§ 108
§ 125§ 125
© Steven J. Willis 2008. All Rights Reserved. 62
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 103§ 103
§ 71(c)§ 71(c)
§ 102§ 102
§ 104§ 104
§ 106§ 106
§ 117§ 117
§ 121§ 121
§ 115§ 115
§ 108§ 108
§ 125§ 125
You should know these code sections.The
following slides briefly discuss them.
Each section is on the Top 100 List.
You should know these code sections.The
following slides briefly discuss them.
Each section is on the Top 100 List.
© Steven J. Willis 2008. All Rights Reserved. 63
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 103§ 103
§ 71(c)§ 71(c)
§ 102§ 102
§ 104§ 104
§ 106§ 106
§ 117§ 117
§ 121§ 121
§ 115§ 115
§ 108§ 108
§ 125§ 125
Excludes child support receipts and alimony (in
some cases).
Excludes child support receipts and alimony (in
some cases).
© Steven J. Willis 2008. All Rights Reserved. 64
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 103§ 103
§ 71(c)§ 71(c)
§ 102§ 102
§ 104§ 104
§ 106§ 106
§ 117§ 117
§ 121§ 121
§ 115§ 115
§ 108§ 108
§ 125§ 125
Excludes gifts and inheritance.
Excludes gifts and inheritance.
© Steven J. Willis 2008. All Rights Reserved. 65
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 103§ 103
§ 71(c)§ 71(c)
§ 102§ 102
§ 104§ 104
§ 106§ 106
§ 117§ 117
§ 121§ 121
§ 115§ 115
§ 108§ 108
§ 125§ 125
Excludes interest on state and local bonds. Excludes interest on
state and local bonds.
© Steven J. Willis 2008. All Rights Reserved. 66
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 103§ 103
§ 71(c)§ 71(c)
§ 102§ 102
§ 104§ 104
§ 106§ 106
§ 117§ 117
§ 121§ 121
§ 115§ 115
§ 108§ 108
§ 125§ 125
Excludes personal physical injury awards
Excludes personal physical injury awards
© Steven J. Willis 2008. All Rights Reserved. 67
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 103§ 103
§ 71(c)§ 71(c)
§ 102§ 102
§ 104§ 104
§ 106§ 106
§ 117§ 117
§ 121§ 121
§ 115§ 115
§ 108§ 108
§ 125§ 125
Excludes employer provided health
insurance.
Excludes employer provided health
insurance.
© Steven J. Willis 2008. All Rights Reserved. 68
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 103§ 103
§ 71(c)§ 71(c)
§ 102§ 102
§ 104§ 104
§ 106§ 106
§ 117§ 117
§ 121§ 121
§ 115§ 115
§ 108§ 108
§ 125§ 125
Excludes income from some discharges of
indebtedness.
Excludes income from some discharges of
indebtedness.
© Steven J. Willis 2008. All Rights Reserved. 69
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 103§ 103
§ 71(c)§ 71(c)
§ 102§ 102
§ 104§ 104
§ 106§ 106
§ 117§ 117
§ 121§ 121
§ 115§ 115
§ 108§ 108
§ 125§ 125
Excludes income of state and local governments.
Excludes income of state and local governments.
© Steven J. Willis 2008. All Rights Reserved. 70
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 103§ 103
§ 71(c)§ 71(c)
§ 102§ 102
§ 104§ 104
§ 106§ 106
§ 117§ 117
§ 121§ 121
§ 115§ 115
§ 108§ 108
§ 125§ 125
Excludes qualified scholarships.
Excludes qualified scholarships.
© Steven J. Willis 2008. All Rights Reserved. 71
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 103§ 103
§ 71(c)§ 71(c)
§ 102§ 102
§ 104§ 104
§ 106§ 106
§ 117§ 117
§ 121§ 121
§ 115§ 115
§ 108§ 108
§ 125§ 125
Excludes gain on the sale of a principal
residence (with limitations).
Excludes gain on the sale of a principal
residence (with limitations).
© Steven J. Willis 2008. All Rights Reserved. 72
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 103§ 103
§ 71(c)§ 71(c)
§ 102§ 102
§ 104§ 104
§ 106§ 106
§ 117§ 117
§ 121§ 121
§ 115§ 115
§ 108§ 108
§ 125§ 125
Excludes service income contributed to
flexible employee benefit plans [cafeteria
plans].
Excludes service income contributed to
flexible employee benefit plans [cafeteria
plans].
© Steven J. Willis 2008. All Rights Reserved. 73
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
© Steven J. Willis 2008. All Rights Reserved. 74
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
© Steven J. Willis 2008. All Rights Reserved. 75
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 151§ 151
© Steven J. Willis 2008. All Rights Reserved. 76
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 151§ 151
§ 162§ 162
© Steven J. Willis 2008. All Rights Reserved. 77
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
© Steven J. Willis 2008. All Rights Reserved. 78
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
© Steven J. Willis 2008. All Rights Reserved. 79
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
§ 167§ 167
© Steven J. Willis 2008. All Rights Reserved. 80
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
§ 167§ 167
§ 170§ 170
© Steven J. Willis 2008. All Rights Reserved. 81
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
§ 167§ 167
§ 179§ 179
§ 170§ 170
© Steven J. Willis 2008. All Rights Reserved. 82
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
§ 167§ 167
§ 179§ 179
§ 170§ 170
§ 195§ 195
© Steven J. Willis 2008. All Rights Reserved. 83
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
§ 167§ 167
§ 179§ 179
§ 170§ 170
§ 195§ 195
§ 197§ 197
© Steven J. Willis 2008. All Rights Reserved. 84
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
§ 167§ 167
§ 179§ 179
§ 170§ 170
§ 195§ 195
§ 197§ 197
§ 212§ 212
© Steven J. Willis 2008. All Rights Reserved. 85
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
§ 167§ 167
§ 179§ 179
§ 170§ 170
§ 195§ 195
§ 197§ 197
§ 212§ 212
§ 215§ 215
© Steven J. Willis 2008. All Rights Reserved. 86
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
§ 167§ 167
§ 179§ 179
§ 170§ 170
§ 195§ 195
§ 197§ 197
§ 212§ 212
§ 215§ 215
§ 217§ 217
© Steven J. Willis 2008. All Rights Reserved. 87
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
§ 167§ 167
§ 179§ 179
§ 170§ 170
§ 195§ 195
§ 197§ 197
§ 212§ 212
§ 215§ 215
§ 217§ 217
§ 219§ 219
© Steven J. Willis 2008. All Rights Reserved. 88
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
§ 167§ 167
§ 179§ 179
§ 170§ 170
§ 195§ 195
§ 197§ 197
§ 212§ 212
§ 215§ 215
§ 217§ 217
§ 219§ 219
You should know these code sections.The
following slides briefly discuss them.
Each section is on the Top 100 List.
You should know these code sections.The
following slides briefly discuss them.
Each section is on the Top 100 List.
© Steven J. Willis 2008. All Rights Reserved. 89
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
§ 167§ 167
§ 179§ 179
§ 170§ 170
§ 195§ 195
§ 197§ 197
§ 212§ 212
§ 215§ 215
§ 217§ 217
§ 219§ 219
Allows deductions for dependants and
personal exemptions.
Allows deductions for dependants and
personal exemptions.
© Steven J. Willis 2008. All Rights Reserved. 90
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
§ 167§ 167
§ 179§ 179
§ 170§ 170
§ 195§ 195
§ 197§ 197
§ 212§ 212
§ 215§ 215
§ 217§ 217
§ 219§ 219
Allows deductions for ordinary and necessary
business expenses.
Allows deductions for ordinary and necessary
business expenses.
© Steven J. Willis 2008. All Rights Reserved. 91
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
§ 167§ 167
§ 179§ 179
§ 170§ 170
§ 195§ 195
§ 197§ 197
§ 212§ 212
§ 215§ 215
§ 217§ 217
§ 219§ 219
Allows deductions for interest (with limitations).
Allows deductions for interest (with limitations).
© Steven J. Willis 2008. All Rights Reserved. 92
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
§ 167§ 167
§ 179§ 179
§ 170§ 170
§ 195§ 195
§ 197§ 197
§ 212§ 212
§ 215§ 215
§ 217§ 217
§ 219§ 219
Allows deductions for some state and local
taxes.
Allows deductions for some state and local
taxes.
© Steven J. Willis 2008. All Rights Reserved. 93
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
§ 167§ 167
§ 179§ 179
§ 170§ 170
§ 195§ 195
§ 197§ 197
§ 212§ 212
§ 215§ 215
§ 217§ 217
§ 219§ 219
Allows deductions for depreciation on property
used in a trade or business or for the
production of income .
Allows deductions for depreciation on property
used in a trade or business or for the
production of income .
© Steven J. Willis 2008. All Rights Reserved. 94
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
§ 167§ 167
§ 179§ 179
§ 170§ 170
§ 195§ 195
§ 197§ 197
§ 212§ 212
§ 215§ 215
§ 217§ 217
§ 219§ 219
Allows deductions for charitable contributions
(with significant limitations).
Allows deductions for charitable contributions
(with significant limitations).
© Steven J. Willis 2008. All Rights Reserved. 95
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
§ 167§ 167
§ 179§ 179
§ 170§ 170
§ 195§ 195
§ 197§ 197
§ 212§ 212
§ 215§ 215
§ 217§ 217
§ 219§ 219
Allows election of an expense to deduct
rather than capitalize certain tangible
business property.
Allows election of an expense to deduct
rather than capitalize certain tangible
business property.
© Steven J. Willis 2008. All Rights Reserved. 96
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
§ 167§ 167
§ 179§ 179
§ 170§ 170
§ 195§ 195
§ 197§ 197
§ 212§ 212
§ 215§ 215
§ 217§ 217
§ 219§ 219
Allows amortization of “active business” start- up expenditures over a
60-month period..
Allows amortization of “active business” start- up expenditures over a
60-month period..
© Steven J. Willis 2008. All Rights Reserved. 97
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
§ 167§ 167
§ 179§ 179
§ 170§ 170
§ 195§ 195
§ 197§ 197
§ 212§ 212
§ 215§ 215
§ 217§ 217
§ 219§ 219
Allows amortization of goodwill and certain
other intangibles over a 15-year period.
Allows amortization of goodwill and certain
other intangibles over a 15-year period.
© Steven J. Willis 2008. All Rights Reserved. 98
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
§ 167§ 167
§ 179§ 179
§ 170§ 170
§ 195§ 195
§ 197§ 197
§ 212§ 212
§ 215§ 215
§ 217§ 217
§ 219§ 219
Allows deductions for production of income expenses and for tax
advice.
Allows deductions for production of income expenses and for tax
advice.
© Steven J. Willis 2008. All Rights Reserved. 99
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
§ 167§ 167
§ 179§ 179
§ 170§ 170
§ 195§ 195
§ 197§ 197
§ 212§ 212
§ 215§ 215
§ 217§ 217
§ 219§ 219
Allows deductions for alimony payments (with
limitations).
Allows deductions for alimony payments (with
limitations).
© Steven J. Willis 2008. All Rights Reserved. 100
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
§ 167§ 167
§ 179§ 179
§ 170§ 170
§ 195§ 195
§ 197§ 197
§ 212§ 212
§ 215§ 215
§ 217§ 217
§ 219§ 219
Allows deductions for job-related moving
expenses (with distance limitations).
Allows deductions for job-related moving
expenses (with distance limitations).
© Steven J. Willis 2008. All Rights Reserved. 101
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 163§ 163
§ 151§ 151
§ 162§ 162
§ 164§ 164
§ 167§ 167
§ 179§ 179
§ 170§ 170
§ 195§ 195
§ 197§ 197
§ 212§ 212
§ 215§ 215
§ 217§ 217
§ 219§ 219
Allows deductions for contributions to certain
retirement accounts.
Allows deductions for contributions to certain
retirement accounts.
© Steven J. Willis 2008. All Rights Reserved. 102
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
© Steven J. Willis 2008. All Rights Reserved. 103
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 262§ 262
© Steven J. Willis 2008. All Rights Reserved. 104
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 265§ 265
§ 262§ 262
© Steven J. Willis 2008. All Rights Reserved. 105
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 265§ 265
§ 262§ 262
§ 267§ 267
© Steven J. Willis 2008. All Rights Reserved. 106
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 265§ 265
§ 262§ 262
§ 267§ 267
§ 274§ 274
© Steven J. Willis 2008. All Rights Reserved. 107
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 265§ 265
§ 262§ 262
§ 267§ 267
§ 274§ 274
§ 280A§ 280A
© Steven J. Willis 2008. All Rights Reserved. 108
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 265§ 265
§ 262§ 262
§ 267§ 267
§ 274§ 274
§ 280A§ 280A
§ 183§ 183
© Steven J. Willis 2008. All Rights Reserved. 109
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 265§ 265
§ 262§ 262
§ 267§ 267
§ 274§ 274
§ 280A§ 280A
You should know these code sections.The
following slides briefly discuss them.
Each section is on the Top 100 List.
You should know these code sections.The
following slides briefly discuss them.
Each section is on the Top 100 List.
§ 183§ 183
© Steven J. Willis 2008. All Rights Reserved. 110
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 265§ 265
§ 262§ 262
§ 267§ 267
§ 274§ 274
§ 280A§ 280A
Disallows deductions for personal expenses. Disallows deductions
for personal expenses.
§ 183§ 183
© Steven J. Willis 2008. All Rights Reserved. 111
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 265§ 265
§ 262§ 262
§ 267§ 267
§ 274§ 274
§ 280A§ 280A
Disallows deductions for interest and
expenses related to tax exempt income.
Disallows deductions for interest and
expenses related to tax exempt income.
§ 183§ 183
© Steven J. Willis 2008. All Rights Reserved. 112
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 265§ 265
§ 262§ 262
§ 267§ 267
§ 274§ 274
§ 280A§ 280A
Disallows deductions for losses and expenses in
transactions between related persons.
Disallows deductions for losses and expenses in
transactions between related persons.
§ 183§ 183
© Steven J. Willis 2008. All Rights Reserved. 113
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 265§ 265
§ 262§ 262
§ 267§ 267
§ 274§ 274
§ 280A§ 280A
Disallows deductions for certain
entertainment expenses.
Disallows deductions for certain
entertainment expenses.
§ 183§ 183
© Steven J. Willis 2008. All Rights Reserved. 114
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 265§ 265
§ 262§ 262
§ 267§ 267
§ 274§ 274
§ 280A§ 280A
Disallows deductions for expenses in
connection with the business use of a
dwelling unit.
Disallows deductions for expenses in
connection with the business use of a
dwelling unit.
§ 183§ 183
© Steven J. Willis 2008. All Rights Reserved. 115
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 265§ 265
§ 262§ 262
§ 267§ 267
§ 274§ 274
§ 280A§ 280A
Disallows deductions for expenses in connection with
activities not engaged in for profit.
Disallows deductions for expenses in connection with
activities not engaged in for profit.
§ 183§ 183
© Steven J. Willis 2008. All Rights Reserved. 116
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
© Steven J. Willis 2008. All Rights Reserved. 117
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 263§ 263
© Steven J. Willis 2008. All Rights Reserved. 118
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 263§ 263
§ 280F§ 280F
© Steven J. Willis 2008. All Rights Reserved. 119
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 263§ 263
§ 280F§ 280F
§ 465§ 465
© Steven J. Willis 2008. All Rights Reserved. 120
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 263§ 263
§ 280F§ 280F
§ 465§ 465
§ 469§ 469
© Steven J. Willis 2008. All Rights Reserved. 121
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 263§ 263
§ 280F§ 280F
§ 465§ 465
§ 469§ 469
You should know these code sections.The
following slides briefly discuss them.
Each section is on the Top 100 List.
You should know these code sections.The
following slides briefly discuss them.
Each section is on the Top 100 List.
© Steven J. Willis 2008. All Rights Reserved. 122
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 263§ 263
§ 280F§ 280F
§ 465§ 465
§ 469§ 469
Requires capitalization of various expenditures that improve property.
A result of “capitalization” is that
recovery of the costs is deferred.
Requires capitalization of various expenditures that improve property.
A result of “capitalization” is that
recovery of the costs is deferred.
© Steven J. Willis 2008. All Rights Reserved. 123
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 263§ 263
§ 280F§ 280F
§ 465§ 465
§ 469§ 469
Limits (and thus defers) depreciation
deductions for luxury automobiles and other
listed property.
Limits (and thus defers) depreciation
deductions for luxury automobiles and other
listed property.
© Steven J. Willis 2008. All Rights Reserved. 124
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 263§ 263
§ 280F§ 280F
§ 465§ 465
§ 469§ 469
Limits deductions from non “at risk” activities
to the amount of income from such
activities. Any excess deductions are deferred until the taxpayer has is
at risk.
Limits deductions from non “at risk” activities
to the amount of income from such
activities. Any excess deductions are deferred until the taxpayer has is
at risk.
© Steven J. Willis 2008. All Rights Reserved. 125
Survey of Income Tax Slides
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 263§ 263
§ 280F§ 280F
§ 465§ 465
§ 469§ 469
Limits deductions from passive activities to the amount of income from
such activities. Any excess deductions are
deferred until the taxpayer has passive
income.
Limits deductions from passive activities to the amount of income from
such activities. Any excess deductions are
deferred until the taxpayer has passive
income.
© Steven J. Willis 2008. All Rights Reserved. 126
Survey of Income Tax Slides
WhetherWhether
WhenWhen
WhoWho
How MuchHow Much
CharacterCharacter
IssuesIssues
deduction
income
deduction
income
deduction
income
deduction
income
deduction
income
© Steven J. Willis 2008. All Rights Reserved. 127
Survey of Income Tax Slides
WhetherWhether
WhenWhen
WhoWho
How MuchHow Much
CharacterCharacter
IssuesIssues
deductiondeduction
incomeincome
deduction
income
deductiondeduction
incomeincome
deductiondeduction
incomeincome
deductiondeduction
incomeincome
© Steven J. Willis 2008. All Rights Reserved. 128
Survey of Income Tax Slides
WhenWhen deduction
income
© Steven J. Willis 2008. All Rights Reserved. 129
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
© Steven J. Willis 2008. All Rights Reserved. 130
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
© Steven J. Willis 2008. All Rights Reserved. 131
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
© Steven J. Willis 2008. All Rights Reserved. 132
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
InventoryInventory
© Steven J. Willis 2008. All Rights Reserved. 133
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
InventoryInventory
InstallmentInstallment
© Steven J. Willis 2008. All Rights Reserved. 134
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
InventoryInventory
InstallmentInstallment
Percentage Completion Percentage Completion
© Steven J. Willis 2008. All Rights Reserved. 135
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
InventoryInventory
InstallmentInstallment
Percentage Completion Percentage Completion
HybridHybrid
© Steven J. Willis 2008. All Rights Reserved. 136
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
InventoryInventory
InstallmentInstallment
Percentage Completion Percentage Completion
HybridHybrid
453453
© Steven J. Willis 2008. All Rights Reserved. 137
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
InventoryInventory
InstallmentInstallment
Percentage Completion Percentage Completion
HybridHybrid
453453
You should know this code section, which is
on the Top 100 List.
You should know this code section, which is
on the Top 100 List.
© Steven J. Willis 2008. All Rights Reserved. 138
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
InventoryInventory
InstallmentInstallment
Percentage Completion Percentage Completion
HybridHybrid
453453
You should know this code section, which is
on the Top 100 List.
You should know this code section, which is
on the Top 100 List.
It provides for the installment method of accounting. Unless taxpayers elect otherwise, gain
on property sold on the installment method is reported
as the funds are received.
It provides for the installment method of accounting. Unless taxpayers elect otherwise, gain
on property sold on the installment method is reported
as the funds are received.
© Steven J. Willis 2008. All Rights Reserved. 139
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
The essence of the cash method of income involves
receipt.
© Steven J. Willis 2008. All Rights Reserved. 140
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
The essence of the cash method of income involves
receipt.
receiptreceipt
© Steven J. Willis 2008. All Rights Reserved. 141
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
The essence of the cash method of income involves
receipt.
receiptreceipt
The essence of the cash method of
deductions involves receipt.
Cash MethodCash Method
© Steven J. Willis 2008. All Rights Reserved. 142
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
The essence of the cash method of income involves
receipt.
receiptreceipt
The essence of the cash method of
deductions involves payment.
Cash MethodCash Method paymentpayment
© Steven J. Willis 2008. All Rights Reserved. 143
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
The Cash Method of Accounting for
income involves the study of four
doctrines.
© Steven J. Willis 2008. All Rights Reserved. 144
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
Actual receiptActual receiptThe Cash Method of
Accounting for income involves the
study of four doctrines.
© Steven J. Willis 2008. All Rights Reserved. 145
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
Actual receiptActual receipt
constructive receipt
constructive receipt
The Cash Method of Accounting for
income involves the study of four
doctrines.
© Steven J. Willis 2008. All Rights Reserved. 146
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
Actual receiptActual receipt
constructive receipt
constructive receipt
Receipt of a cash
equivalent
Receipt of a cash
equivalent
The Cash Method of Accounting for
income involves the study of four
doctrines.
© Steven J. Willis 2008. All Rights Reserved. 147
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
Actual receiptActual receipt
constructive receipt
constructive receipt
Receipt of a cash
equivalent
Receipt of a cash
equivalent
Receipt of an economic
benefit
Receipt of an economic
benefit
The Cash Method of Accounting for
income involves the study of four
doctrines.
© Steven J. Willis 2008. All Rights Reserved. 148
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
Actual receiptActual receipt
constructive receipt
constructive receipt
Receipt of a cash
equivalent
Receipt of a cash
equivalent
Receipt of an economic
benefit
Receipt of an economic
benefit
The Cash Method of Accounting for
income involves the study of four
doctrines.
Cash Method taxpayers who wish to defer recognition of income
must avoid application of these doctrines.
© Steven J. Willis 2008. All Rights Reserved. 149
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
Actual receiptActual receipt
constructive receipt
constructive receipt
Receipt of a cash
equivalent
Receipt of a cash
equivalent
Receipt of an economic
benefit
Receipt of an economic
benefit
The Cash Method of Accounting for
income involves the study of four
doctrines.
Cash Method taxpayers who wish to defer recognition of income
must avoid application of these doctrines.
A course in tax school will cover how and when this
is possible.
© Steven J. Willis 2008. All Rights Reserved. 150
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
receiptreceiptThe essence of the accrual method of income involves the “earlier of”
test.
The essence of the cash method of income involves
receipt.
Cash MethodCash Method paymentpayment
© Steven J. Willis 2008. All Rights Reserved. 151
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
Cash MethodCash Method paymentpayment
Earlier ofEarlier of
receiptreceiptThe essence of the accrual method of income involves the “earlier of”
test.
The essence of the cash method of income involves
receipt.
© Steven J. Willis 2008. All Rights Reserved. 152
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
Cash MethodCash Method
Accrual MethodAccrual Method
paymentpayment
Earlier ofEarlier of
receiptreceiptThe essence of the accrual method of income involves the “earlier of”
test.
The essence of the accrual method of
deductions involves the “later
of” test.Other MethodsOther Methods
© Steven J. Willis 2008. All Rights Reserved. 153
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
Cash MethodCash Method
Accrual MethodAccrual Method
paymentpayment
Later ofLater of
Earlier ofEarlier of
receiptreceiptThe essence of the accrual method of income involves the “earlier of”
test.
The essence of the accrual method of
deductions involves the “later
of” test.Other MethodsOther Methods
© Steven J. Willis 2008. All Rights Reserved. 154
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
Cash MethodCash Method
Accrual MethodAccrual Method
paymentpayment
Later ofLater of
Earlier ofEarlier of
receiptreceipt
Other MethodsOther Methods
The “earlier of” test requires
inclusion at the earliest of three
events.
© Steven J. Willis 2008. All Rights Reserved. 155
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
Cash MethodCash Method
Accrual MethodAccrual Method
paymentpayment
Later ofLater of
Earlier ofEarlier of
receiptreceipt
Other MethodsOther Methods
The “earlier of” test requires
inclusion at the earliest of three
events.
duedue
© Steven J. Willis 2008. All Rights Reserved. 156
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
Cash MethodCash Method
Accrual MethodAccrual Method
paymentpayment
Later ofLater of
Earlier ofEarlier of
receiptreceipt
Other MethodsOther Methods
The “earlier of” test requires
inclusion at the earliest of three
events.
duedue
paidpaid
© Steven J. Willis 2008. All Rights Reserved. 157
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
Cash MethodCash Method
Accrual MethodAccrual Method
paymentpayment
Later ofLater of
Earlier ofEarlier of
receiptreceipt
Other MethodsOther Methods
The “earlier of” test requires
inclusion at the earliest of three
events.
duedue
paidpaid
earnedearned
© Steven J. Willis 2008. All Rights Reserved. 158
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
Cash MethodCash Method
Accrual MethodAccrual Method
paymentpayment
Later ofLater of
Earlier ofEarlier of
receiptreceipt
Other MethodsOther Methods
The “earlier of” test requires
inclusion at the earliest of three
events.
duedue
paidpaid
earnedearned
This test arises from a trilogy of Supreme Court
decisions which culminated in the case of Schlude v. Comm’r, 372
U.S. 128 (1963).
This test arises from a trilogy of Supreme Court
decisions which culminated in the case of Schlude v. Comm’r, 372
U.S. 128 (1963).
© Steven J. Willis 2008. All Rights Reserved. 159
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
Cash MethodCash Method
Accrual MethodAccrual Method
paymentpayment
Later ofLater of
Earlier ofEarlier of
receiptreceipt
Other MethodsOther Methods
The “earlier of” test requires
inclusion at the earliest of three
events.
duedue
paidpaid
earnedearned
This test arises from a trilogy of Supreme Court
decisions which culminated in the case of Schlude v. Comm’r, 372
U.S. 128 (1963).
This test arises from a trilogy of Supreme Court
decisions which culminated in the case of Schlude v. Comm’r, 372
U.S. 128 (1963). This case is on the Top 100 list. This case is on the Top 100 list.
© Steven J. Willis 2008. All Rights Reserved. 160
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
Cash MethodCash Method
Accrual MethodAccrual Method
paymentpayment
Later ofLater of
Earlier ofEarlier of
receiptreceipt
Other MethodsOther Methods
The “earlier of” test requires
inclusion at the earliest of three
events.
duedue
paidpaid
earnedearned
The “later of” test defers deductions until the latest of
two events.
© Steven J. Willis 2008. All Rights Reserved. 161
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
Cash MethodCash Method
Accrual MethodAccrual Method
paymentpayment
Later ofLater of
Earlier ofEarlier of
receiptreceipt
Other MethodsOther Methods
The “earlier of” test requires
inclusion at the earliest of three
events.
duedue
paidpaid
earnedearned
The “later of” test defers deductions until the latest of
two events.
All eventsAll events
© Steven J. Willis 2008. All Rights Reserved. 162
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
Cash MethodCash Method
Accrual MethodAccrual Method
paymentpayment
Later ofLater of
Earlier ofEarlier of
receiptreceipt
Other MethodsOther Methods
The “earlier of” test requires
inclusion at the earliest of three
events.
duedue
paidpaid
earnedearned
The “later of” test defers deductions until the latest of
two events.
All eventsAll events
Economic performance Economic
performance
© Steven J. Willis 2008. All Rights Reserved. 163
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
Cash MethodCash Method
Accrual MethodAccrual Method
paymentpayment
Later ofLater of
Earlier ofEarlier of
receiptreceipt
Other MethodsOther Methods
The “earlier of” test requires
inclusion at the earliest of three
events.
duedue
paidpaid
earnedearned
The “later of” test defers deductions until the latest of
two events.
All eventsAll events
Economic performance Economic
performance
This test arises from section 461(h).
This test arises from section 461(h).
© Steven J. Willis 2008. All Rights Reserved. 164
Survey of Income Tax Slides
WhenWhen deduction
income
Cash MethodCash Method
Accrual MethodAccrual Method
Other MethodsOther Methods
Cash MethodCash Method
Accrual MethodAccrual Method
paymentpayment
Later ofLater of
Earlier ofEarlier of
receiptreceipt
Other MethodsOther Methods
The “earlier of” test requires
inclusion at the earliest of three
events.
duedue
paidpaid
earnedearned
The “later of” test defers deductions until the latest of
two events.
All eventsAll events
Economic performance Economic
performance
This test arises from section 461(h).
This test arises from section 461(h).
You should know this code section, which is
on the Top 100 List.
You should know this code section, which is
on the Top 100 List.
© Steven J. Willis 2008. All Rights Reserved. 165
Survey of Income Tax Slides
WhetherWhether
WhenWhen
WhoWho
How MuchHow Much
CharacterCharacter
IssuesIssues
deduction
income
deduction
income
deduction
income
deduction
income
deduction
income
© Steven J. Willis 2008. All Rights Reserved. 166
Survey of Income Tax Slides
WhetherWhether
WhenWhen
WhoWho
How MuchHow Much
CharacterCharacter
IssuesIssues
deduction
income
deduction
income
deduction
income
deduction
income
deduction
income
© Steven J. Willis 2008. All Rights Reserved. 167
Survey of Income Tax Slides
WhoWho deduction
income
© Steven J. Willis 2008. All Rights Reserved. 168
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
© Steven J. Willis 2008. All Rights Reserved. 169
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
This doctrine applies both to
income and deductions.
© Steven J. Willis 2008. All Rights Reserved. 170
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
© Steven J. Willis 2008. All Rights Reserved. 171
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
These sections apply both to income and deductions.
© Steven J. Willis 2008. All Rights Reserved. 172
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
The Doctrine covers evolved from six
seminal cases, which are on the Top 100 List.
The Doctrine covers evolved from six
seminal cases, which are on the Top 100 List.
© Steven J. Willis 2008. All Rights Reserved. 173
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
The Doctrine covers evolved from six
seminal cases, which are on the Top 100 List.
The Doctrine covers evolved from six
seminal cases, which are on the Top 100 List.
Each case and the Doctrine is covered more thoroughly through the
Top Topics list.
Each case and the Doctrine is covered more thoroughly through the
Top Topics list.
© Steven J. Willis 2008. All Rights Reserved. 174
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
Lucas v. Earl, 281 U.S. 111 (1930)
Lucas v. Earl, 281 U.S. 111 (1930)
© Steven J. Willis 2008. All Rights Reserved. 175
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
Lucas v. Earl, 281 U.S. 111 (1930)
Lucas v. Earl, 281 U.S. 111 (1930)The person who
performs services is taxed on the income
from the services.
The person who performs services is taxed on the income
from the services.
© Steven J. Willis 2008. All Rights Reserved. 176
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
Lucas v. Earl, 281 U.S. 111 (1930)
Lucas v. Earl, 281 U.S. 111 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
© Steven J. Willis 2008. All Rights Reserved. 177
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
Lucas v. Earl, 281 U.S. 111 (1930)
Lucas v. Earl, 281 U.S. 111 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
The person who performs services is taxed on the
income from the services; however, in a community
property state, spouses may assign income by operation
of law.
The person who performs services is taxed on the
income from the services; however, in a community
property state, spouses may assign income by operation
of law.
© Steven J. Willis 2008. All Rights Reserved. 178
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
Lucas v. Earl, 281 U.S. 111 (1930)
Lucas v. Earl, 281 U.S. 111 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Blair v. Comm’r, 300 U.S. 5 (1937)
Blair v. Comm’r, 300 U.S. 5 (1937)
© Steven J. Willis 2008. All Rights Reserved. 179
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
Lucas v. Earl, 281 U.S. 111 (1930)
Lucas v. Earl, 281 U.S. 111 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Blair v. Comm’r, 300 U.S. 5 (1937)
Blair v. Comm’r, 300 U.S. 5 (1937)
A transfer of an entire interest in property –
including an income stream – is a successful
assignment of income.
A transfer of an entire interest in property –
including an income stream – is a successful
assignment of income.
© Steven J. Willis 2008. All Rights Reserved. 180
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
Lucas v. Earl, 281 U.S. 111 (1930)
Lucas v. Earl, 281 U.S. 111 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Blair v. Comm’r, 300 U.S. 5 (1937)
Blair v. Comm’r, 300 U.S. 5 (1937)
Helvering v. Horst, 311 U.S. 112 (1940)
Helvering v. Horst, 311 U.S. 112 (1940)
© Steven J. Willis 2008. All Rights Reserved. 181
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
Lucas v. Earl, 281 U.S. 111 (1930)
Lucas v. Earl, 281 U.S. 111 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Blair v. Comm’r, 300 U.S. 5 (1937)
Blair v. Comm’r, 300 U.S. 5 (1937)
Helvering v. Horst, 311 U.S. 112 (1940)
Helvering v. Horst, 311 U.S. 112 (1940)
The person who owns property is taxed on the income from the
property.
The person who owns property is taxed on the income from the
property.
© Steven J. Willis 2008. All Rights Reserved. 182
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
Lucas v. Earl, 281 U.S. 111 (1930)
Lucas v. Earl, 281 U.S. 111 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Blair v. Comm’r, 300 U.S. 5 (1937)
Blair v. Comm’r, 300 U.S. 5 (1937)
Helvering v. Eubank, 311 U.S. 122 (1940)
Helvering v. Eubank, 311 U.S. 122 (1940)
Helvering v. Horst, 311 U.S. 112 (1940)
Helvering v. Horst, 311 U.S. 112 (1940)
© Steven J. Willis 2008. All Rights Reserved. 183
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
Lucas v. Earl, 281 U.S. 111 (1930)
Lucas v. Earl, 281 U.S. 111 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Blair v. Comm’r, 300 U.S. 5 (1937)
Blair v. Comm’r, 300 U.S. 5 (1937)
Helvering v. Eubank, 311 U.S. 122 (1940)
Helvering v. Eubank, 311 U.S. 122 (1940)
Helvering v. Horst, 311 U.S. 112 (1940)
Helvering v. Horst, 311 U.S. 112 (1940)
This case helps distinguish property from services: in this
case, a stream of income was from
services.
This case helps distinguish property from services: in this
case, a stream of income was from
services.
© Steven J. Willis 2008. All Rights Reserved. 184
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
Lucas v. Earl, 281 U.S. 111 (1930)
Lucas v. Earl, 281 U.S. 111 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Blair v. Comm’r, 300 U.S. 5 (1937)
Blair v. Comm’r, 300 U.S. 5 (1937)
Helvering v. Eubank, 311 U.S. 122 (1940)
Helvering v. Eubank, 311 U.S. 122 (1940)
Harrison v. Schaffner, 312 U.S. 579 (1941)
Harrison v. Schaffner, 312 U.S. 579 (1941)
Helvering v. Horst, 311 U.S. 112 (1940)
Helvering v. Horst, 311 U.S. 112 (1940)
© Steven J. Willis 2008. All Rights Reserved. 185
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
Lucas v. Earl, 281 U.S. 111 (1930)
Lucas v. Earl, 281 U.S. 111 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Blair v. Comm’r, 300 U.S. 5 (1937)
Blair v. Comm’r, 300 U.S. 5 (1937)
Helvering v. Eubank, 311 U.S. 122 (1940)
Helvering v. Eubank, 311 U.S. 122 (1940)
Harrison v. Schaffner, 312 U.S. 579 (1941)
Harrison v. Schaffner, 312 U.S. 579 (1941)
Helvering v. Horst, 311 U.S. 112 (1940)
Helvering v. Horst, 311 U.S. 112 (1940)
This case refined the Blair rules involving
permissible assignments of a part of a stream of income.
This case refined the Blair rules involving
permissible assignments of a part of a stream of income.
© Steven J. Willis 2008. All Rights Reserved. 186
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
Lucas v. Earl, 281 U.S. 111 (1930)
Lucas v. Earl, 281 U.S. 111 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Blair v. Comm’r, 300 U.S. 5 (1937)
Blair v. Comm’r, 300 U.S. 5 (1937)
Helvering v. Eubank, 311 U.S. 122 (1940)
Helvering v. Eubank, 311 U.S. 122 (1940)
Harrison v. Schaffner, 312 U.S. 579 (1941)
Harrison v. Schaffner, 312 U.S. 579 (1941)
Helvering v. Horst, 311 U.S. 112 (1940)
Helvering v. Horst, 311 U.S. 112 (1940)
The Who issue involves many code sections. Four examples are on
the Top 100 List.
The Who issue involves many code sections. Four examples are on
the Top 100 List.
© Steven J. Willis 2008. All Rights Reserved. 187
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
482482
Lucas v. Earl, 281 U.S. 111 (1930)
Lucas v. Earl, 281 U.S. 111 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Blair v. Comm’r, 300 U.S. 5 (1937)
Blair v. Comm’r, 300 U.S. 5 (1937)
Helvering v. Eubank, 311 U.S. 122 (1940)
Helvering v. Eubank, 311 U.S. 122 (1940)
Harrison v. Schaffner, 312 U.S. 579 (1941)
Harrison v. Schaffner, 312 U.S. 579 (1941)
Helvering v. Horst, 311 U.S. 112 (1940)
Helvering v. Horst, 311 U.S. 112 (1940)
© Steven J. Willis 2008. All Rights Reserved. 188
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
482482
Lucas v. Earl, 281 U.S. 111 (1930)
Lucas v. Earl, 281 U.S. 111 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Blair v. Comm’r, 300 U.S. 5 (1937)
Blair v. Comm’r, 300 U.S. 5 (1937)
Helvering v. Eubank, 311 U.S. 122 (1940)
Helvering v. Eubank, 311 U.S. 122 (1940)
Harrison v. Schaffner, 312 U.S. 579 (1941)
Harrison v. Schaffner, 312 U.S. 579 (1941)
Helvering v. Horst, 311 U.S. 112 (1940)
Helvering v. Horst, 311 U.S. 112 (1940)
This section allows the government to re-
allocate income and deductions, credits,
and allowances among commonly
controlled businesses.
This section allows the government to re-
allocate income and deductions, credits,
and allowances among commonly
controlled businesses.
© Steven J. Willis 2008. All Rights Reserved. 189
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
482482
704(b)704(b)
Lucas v. Earl, 281 U.S. 111 (1930)
Lucas v. Earl, 281 U.S. 111 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Blair v. Comm’r, 300 U.S. 5 (1937)
Blair v. Comm’r, 300 U.S. 5 (1937)
Helvering v. Eubank, 311 U.S. 122 (1940)
Helvering v. Eubank, 311 U.S. 122 (1940)
Harrison v. Schaffner, 312 U.S. 579 (1941)
Harrison v. Schaffner, 312 U.S. 579 (1941)
Helvering v. Horst, 311 U.S. 112 (1940)
Helvering v. Horst, 311 U.S. 112 (1940)
© Steven J. Willis 2008. All Rights Reserved. 190
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
482482
704(b)704(b)
Lucas v. Earl, 281 U.S. 111 (1930)
Lucas v. Earl, 281 U.S. 111 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Blair v. Comm’r, 300 U.S. 5 (1937)
Blair v. Comm’r, 300 U.S. 5 (1937)
Helvering v. Eubank, 311 U.S. 122 (1940)
Helvering v. Eubank, 311 U.S. 122 (1940)
Harrison v. Schaffner, 312 U.S. 579 (1941)
Harrison v. Schaffner, 312 U.S. 579 (1941)
Helvering v. Horst, 311 U.S. 112 (1940)
Helvering v. Horst, 311 U.S. 112 (1940)
This section allows partnerships to specially allocate income, gains, deductions, losses, and credits among partners
(with significant limitations and restrictions).
This section allows partnerships to specially allocate income, gains, deductions, losses, and credits among partners
(with significant limitations and restrictions).
© Steven J. Willis 2008. All Rights Reserved. 191
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
10411041
482482
704(b)704(b)
Lucas v. Earl, 281 U.S. 111 (1930)
Lucas v. Earl, 281 U.S. 111 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Blair v. Comm’r, 300 U.S. 5 (1937)
Blair v. Comm’r, 300 U.S. 5 (1937)
Helvering v. Eubank, 311 U.S. 122 (1940)
Helvering v. Eubank, 311 U.S. 122 (1940)
Harrison v. Schaffner, 312 U.S. 579 (1941)
Harrison v. Schaffner, 312 U.S. 579 (1941)
Helvering v. Horst, 311 U.S. 112 (1940)
Helvering v. Horst, 311 U.S. 112 (1940)
© Steven J. Willis 2008. All Rights Reserved. 192
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
10411041
482482
704(b)704(b)
Lucas v. Earl, 281 U.S. 111 (1930)
Lucas v. Earl, 281 U.S. 111 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Blair v. Comm’r, 300 U.S. 5 (1937)
Blair v. Comm’r, 300 U.S. 5 (1937)
Helvering v. Eubank, 311 U.S. 122 (1940)
Helvering v. Eubank, 311 U.S. 122 (1940)
Harrison v. Schaffner, 312 U.S. 579 (1941)
Harrison v. Schaffner, 312 U.S. 579 (1941)
Helvering v. Horst, 311 U.S. 112 (1940)
Helvering v. Horst, 311 U.S. 112 (1940)
This section provides for the tax-free transfer of
property between spouses (including incident to divorce).
Because the property’s basis transfers, gains
and losses can be effectively assigned.
This section provides for the tax-free transfer of
property between spouses (including incident to divorce).
Because the property’s basis transfers, gains
and losses can be effectively assigned.
© Steven J. Willis 2008. All Rights Reserved. 193
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
10411041
482482
78727872
704(b)704(b)
Lucas v. Earl, 281 U.S. 111 (1930)
Lucas v. Earl, 281 U.S. 111 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Blair v. Comm’r, 300 U.S. 5 (1937)
Blair v. Comm’r, 300 U.S. 5 (1937)
Helvering v. Eubank, 311 U.S. 122 (1940)
Helvering v. Eubank, 311 U.S. 122 (1940)
Harrison v. Schaffner, 312 U.S. 579 (1941)
Harrison v. Schaffner, 312 U.S. 579 (1941)
Helvering v. Horst, 311 U.S. 112 (1940)
Helvering v. Horst, 311 U.S. 112 (1940)
© Steven J. Willis 2008. All Rights Reserved. 194
Survey of Income Tax Slides
WhoWho deduction
income
Assignment of Income Doctrine Assignment of
Income Doctrine
Code SectionsCode Sections
10411041
482482
78727872
704(b)704(b)
Lucas v. Earl, 281 U.S. 111 (1930)
Lucas v. Earl, 281 U.S. 111 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Blair v. Comm’r, 300 U.S. 5 (1937)
Blair v. Comm’r, 300 U.S. 5 (1937)
Helvering v. Eubank, 311 U.S. 122 (1940)
Helvering v. Eubank, 311 U.S. 122 (1940)
Harrison v. Schaffner, 312 U.S. 579 (1941)
Harrison v. Schaffner, 312 U.S. 579 (1941)
Helvering v. Horst, 311 U.S. 112 (1940)
Helvering v. Horst, 311 U.S. 112 (1940)
This section imputes interest on below market
loans. Essentially, it prevents the assignment
of interest income through the lending of
money.
This section imputes interest on below market
loans. Essentially, it prevents the assignment
of interest income through the lending of
money.
© Steven J. Willis 2008. All Rights Reserved. 195
Survey of Income Tax Slides
WhetherWhether
WhenWhen
WhoWho
How MuchHow Much
CharacterCharacter
IssuesIssues
deduction
income
deduction
income
deduction
income
deduction
income
deduction
income
© Steven J. Willis 2008. All Rights Reserved. 196
Survey of Income Tax Slides
WhetherWhether
WhenWhen
WhoWho
How MuchHow Much
CharacterCharacter
IssuesIssues
deduction
income
deduction
income
deduction
income
deduction
income
deduction
income
© Steven J. Willis 2008. All Rights Reserved. 197
Survey of Income Tax Slides
How MuchHow Much deduction
income
© Steven J. Willis 2008. All Rights Reserved. 198
Survey of Income Tax Slides
How MuchHow Much deduction
income
Amount Realized Amount Realized
© Steven J. Willis 2008. All Rights Reserved. 199
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
© Steven J. Willis 2008. All Rights Reserved. 200
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
These concepts apply both to gain and loss or income
and deductions.
© Steven J. Willis 2008. All Rights Reserved. 201
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
The fundamental formula for gain or loss is:
Amount realized minus basis = gain (loss)
The fundamental formula for gain or loss is:
Amount realized minus basis = gain (loss)
© Steven J. Willis 2008. All Rights Reserved. 202
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
The fundamental formula for gain or loss is:
Amount realized minus basis = gain (loss)
The fundamental formula for gain or loss is:
Amount realized minus basis = gain (loss)
For example:
IfAmount realized = $1,000
Basis = 700
Gain (income) = $ 300
© Steven J. Willis 2008. All Rights Reserved. 203
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
The fundamental formula for gain or loss is:
Amount realized minus basis = gain (loss)
The fundamental formula for gain or loss is:
Amount realized minus basis = gain (loss)
For example:
IfAmount realized = $1,000
Basis = 700
Gain (income) = $ 300
© Steven J. Willis 2008. All Rights Reserved. 204
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
The fundamental formula for gain or loss is:
Amount realized minus basis = gain (loss)
The fundamental formula for gain or loss is:
Amount realized minus basis = gain (loss)
For example:
IfAmount realized = $1,000
Basis = 700
Gain (income) = $ 300
© Steven J. Willis 2008. All Rights Reserved. 205
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
The fundamental formula for gain or loss is:
Amount realized minus basis = gain (loss)
The fundamental formula for gain or loss is:
Amount realized minus basis = gain (loss)
For example:
IfAmount realized = $1,000
Basis = 1,800
loss (deduction) = $ 800
© Steven J. Willis 2008. All Rights Reserved. 206
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
The fundamental formula for gain or loss is:
Amount realized minus basis = gain (loss)
The fundamental formula for gain or loss is:
Amount realized minus basis = gain (loss)
For example:
IfAmount realized = $1,000
Basis = 1,800
loss (deduction) = $ 800
© Steven J. Willis 2008. All Rights Reserved. 207
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
The fundamental formula for gain or loss is:
Amount realized minus basis = gain (loss)
The fundamental formula for gain or loss is:
Amount realized minus basis = gain (loss)
For example:
IfAmount realized = $1,000
Basis = 1,800
loss (deduction) = $ 800
© Steven J. Willis 2008. All Rights Reserved. 208
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
Amount Realized equals the amount of money plus the fair
market value of property received in a
taxable event.
Amount Realized equals the amount of money plus the fair
market value of property received in a
taxable event.
© Steven J. Willis 2008. All Rights Reserved. 209
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
Amount Realized equals the amount of money plus the fair
market value of property received in a
taxable event.
Amount Realized equals the amount of money plus the fair
market value of property received in a
taxable event.
© Steven J. Willis 2008. All Rights Reserved. 210
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
Amount Realized equals the amount of money plus the fair
market value of property received in a
taxable event.
Amount Realized equals the amount of money plus the fair
market value of property received in a
taxable event.
© Steven J. Willis 2008. All Rights Reserved. 211
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
Amount Realized equals the amount of money plus the fair
market value of property received in a
taxable event.
Amount Realized equals the amount of money plus the fair
market value of property received in a
taxable event.
Fair market value is generally the amount a
willing buyer would pay to a willing seller in an arm’s length transaction – with
neither under a compulsion to buy or to sell.
Fair market value is generally the amount a
willing buyer would pay to a willing seller in an arm’s length transaction – with
neither under a compulsion to buy or to sell.
© Steven J. Willis 2008. All Rights Reserved. 212
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
Amount Realized equals the amount of money plus the fair
market value of property received in a
taxable event.
Amount Realized equals the amount of money plus the fair
market value of property received in a
taxable event.
Fair market value is generally the amount a
willing buyer would pay to a willing seller in an arm’s length transaction – with
neither under a compulsion to buy or to sell.
Fair market value is generally the amount a
willing buyer would pay to a willing seller in an arm’s length transaction – with
neither under a compulsion to buy or to sell.
Reginald Turner, 13 T.C.M.462 (CCH) (1954) found that fair market value could have an
element to it unique to the taxpayer.
Reginald Turner, 13 T.C.M.462 (CCH) (1954) found that fair market value could have an
element to it unique to the taxpayer.
© Steven J. Willis 2008. All Rights Reserved. 213
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
Amount Realized equals the amount of money plus the fair
market value of property received in a
taxable event.
Amount Realized equals the amount of money plus the fair
market value of property received in a
taxable event.
Fair market value is generally the amount a
willing buyer would pay to a willing seller in an arm’s length transaction – with
neither under a compulsion to buy or to sell.
Fair market value is generally the amount a
willing buyer would pay to a willing seller in an arm’s length transaction – with
neither under a compulsion to buy or to sell.
Reginald Turner, 13 T.C.M.462 (CCH) (1954) found that fair market value could have an
element to it unique to the taxpayer.
Reginald Turner, 13 T.C.M.462 (CCH) (1954) found that fair market value could have an
element to it unique to the taxpayer.
This case is on the Top 100 list. This case is on the Top 100 list.
© Steven J. Willis 2008. All Rights Reserved. 214
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
Amount Realized equals the amount of money plus the fair
market value of property received in a
taxable event.
Amount Realized equals the amount of money plus the fair
market value of property received in a
taxable event.
This is a paraphrase of section 1001 (which
strictly applies to property dispositions).
© Steven J. Willis 2008. All Rights Reserved. 215
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
Basis is an accounting measure of a
taxpayer’s tax cost in property.
Basis is an accounting measure of a
taxpayer’s tax cost in property.
© Steven J. Willis 2008. All Rights Reserved. 216
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
Seven fundamental code sections describe and define basis. You should be familiar with
these.
Each section is on the Top 100 List.
Seven fundamental code sections describe and define basis. You should be familiar with
these.
Each section is on the Top 100 List.
© Steven J. Willis 2008. All Rights Reserved. 217
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
© Steven J. Willis 2008. All Rights Reserved. 218
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
Section 1011 is mostly a cross
reference to other basis provisions.
Section 1011 is mostly a cross
reference to other basis provisions.
© Steven J. Willis 2008. All Rights Reserved. 219
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
10121012
© Steven J. Willis 2008. All Rights Reserved. 220
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
10121012
Section 1012 provides that
“cost” is a taxpayer’s initial
basis.
Section 1012 provides that
“cost” is a taxpayer’s initial
basis.
© Steven J. Willis 2008. All Rights Reserved. 221
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
10121012
Section 1012 provides that
“cost” is a taxpayer’s initial
basis.
Section 1012 provides that
“cost” is a taxpayer’s initial
basis.
The Philadelphia Park Amusement Co. v. United States, 126 F.Supp.
184 (Cl. Ct. 1954), decision provides interesting gloss on the meaning of “cost.” Essentially,it provides that
cost = the amount received (not paid) in a taxable exchange.
The Philadelphia Park Amusement Co. v. United States, 126 F.Supp.
184 (Cl. Ct. 1954), decision provides interesting gloss on the meaning of “cost.” Essentially,it provides that
cost = the amount received (not paid) in a taxable exchange.
© Steven J. Willis 2008. All Rights Reserved. 222
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
10121012
Section 1012 provides that
“cost” is a taxpayer’s initial
basis.
Section 1012 provides that
“cost” is a taxpayer’s initial
basis.
The Philadelphia Park Amusement Co. v. United States, 126 F.Supp.
184 (Cl. Ct. 1954), decision provides interesting gloss on the meaning of “cost.” Essentially,it provides that
cost = the amount received (not paid) in a taxable exchange.
The Philadelphia Park Amusement Co. v. United States, 126 F.Supp.
184 (Cl. Ct. 1954), decision provides interesting gloss on the meaning of “cost.” Essentially,it provides that
cost = the amount received (not paid) in a taxable exchange.
© Steven J. Willis 2008. All Rights Reserved. 223
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
10121012
Section 1012 provides that
“cost” is a taxpayer’s initial
basis.
Section 1012 provides that
“cost” is a taxpayer’s initial
basis.
The Philadelphia Park Amusement Co. v. United States, 126 F.Supp.
184 (Cl. Ct. 1954), decision provides interesting gloss on the meaning of “cost.” Essentially,it provides that
cost = the amount received (not paid) in a taxable exchange.
The Philadelphia Park Amusement Co. v. United States, 126 F.Supp.
184 (Cl. Ct. 1954), decision provides interesting gloss on the meaning of “cost.” Essentially,it provides that
cost = the amount received (not paid) in a taxable exchange.
© Steven J. Willis 2008. All Rights Reserved. 224
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
10121012
Section 1012 provides that
“cost” is a taxpayer’s initial
basis.
Section 1012 provides that
“cost” is a taxpayer’s initial
basis.
The Philadelphia Park Amusement Co. v. United States, 126 F.Supp.
184 (Cl. Ct. 1954), decision provides interesting gloss on the meaning of “cost.” Essentially,it provides that
cost = the amount received (not paid) in a taxable exchange.
The Philadelphia Park Amusement Co. v. United States, 126 F.Supp.
184 (Cl. Ct. 1954), decision provides interesting gloss on the meaning of “cost.” Essentially,it provides that
cost = the amount received (not paid) in a taxable exchange.This case is on
the Top 100 list. This case is on the Top 100 list.
© Steven J. Willis 2008. All Rights Reserved. 225
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
10121012
10141014
© Steven J. Willis 2008. All Rights Reserved. 226
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
10121012
10141014Section 1014 provides
that a taxpayer’s basis in property received from a
decedent equals the property’s fair market
value on the date of death (or up to six months later).
Section 1014 provides that a taxpayer’s basis in property received from a
decedent equals the property’s fair market
value on the date of death (or up to six months later).
© Steven J. Willis 2008. All Rights Reserved. 227
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
10121012
10141014
10151015
© Steven J. Willis 2008. All Rights Reserved. 228
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
10121012
10141014
10151015Section 1015 provides
that a taxpayer’s basis in property received by gift equals the basis of the
donor.
Section 1015 provides that a taxpayer’s basis in property received by gift equals the basis of the
donor.
© Steven J. Willis 2008. All Rights Reserved. 229
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
10121012
10141014
10151015
10161016
© Steven J. Willis 2008. All Rights Reserved. 230
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
10121012
10141014
10151015
10161016
Section 1016 provides that a taxpayer’s basis
adjusts upward or downward over time.
Section 1016 provides that a taxpayer’s basis
adjusts upward or downward over time.
© Steven J. Willis 2008. All Rights Reserved. 231
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
10121012
10141014
10151015
10161016
10171017
© Steven J. Willis 2008. All Rights Reserved. 232
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
10121012
10141014
10151015
10161016
10171017
Section 1017 provides that a taxpayer’s basis may drop as a result of
“discharge of indebtedness” income excluded under section
108.
Section 1017 provides that a taxpayer’s basis may drop as a result of
“discharge of indebtedness” income excluded under section
108.
© Steven J. Willis 2008. All Rights Reserved. 233
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
10121012
10141014
10151015
10161016
10171017
Section 1017 provides that a taxpayer’s basis may drop as a result of
“discharge of indebtedness” income excluded under section
108.
Section 1017 provides that a taxpayer’s basis may drop as a result of
“discharge of indebtedness” income excluded under section
108.
Section 108, which excludes some income from the discharge of debt, causes the taxpayer to lose various
“tax attributes” as a result.
These may include basis, a net operating loss carryover, a capital loss carryover, or various credits.
Section 108, which excludes some income from the discharge of debt, causes the taxpayer to lose various
“tax attributes” as a result.
These may include basis, a net operating loss carryover, a capital loss carryover, or various credits.
© Steven J. Willis 2008. All Rights Reserved. 234
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
10121012
10141014
10151015
10161016
10171017
Section 1017 provides that a taxpayer’s basis may drop as a result of
“discharge of indebtedness” income excluded under section
108.
Section 1017 provides that a taxpayer’s basis may drop as a result of
“discharge of indebtedness” income excluded under section
108.
Section 108, which excludes some income from the discharge of debt, causes the taxpayer to lose various
“tax attributes” as a result.
These may include basis, a net operating loss carryover, a capital loss carryover, or various credits.
Section 108, which excludes some income from the discharge of debt, causes the taxpayer to lose various
“tax attributes” as a result.
These may include basis, a net operating loss carryover, a capital loss carryover, or various credits.
© Steven J. Willis 2008. All Rights Reserved. 235
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
10121012
10141014
10151015
10161016
10171017
Section 1017 provides that a taxpayer’s basis may drop as a result of
“discharge of indebtedness” income excluded under section
108.
Section 1017 provides that a taxpayer’s basis may drop as a result of
“discharge of indebtedness” income excluded under section
108.
Section 108, which excludes some income from the discharge of debt, causes the taxpayer to lose various
“tax attributes” as a result.
These may include basis, a net operating loss carryover, a capital loss carryover, or various credits.
Section 108, which excludes some income from the discharge of debt, causes the taxpayer to lose various
“tax attributes” as a result.
These may include basis, a net operating loss carryover, a capital loss carryover, or various credits.
Be careful about the order in which tax attributes are
reduced under 108(b).
Be careful about the order in which tax attributes are
reduced under 108(b).
© Steven J. Willis 2008. All Rights Reserved. 236
Survey of Income Tax Slides
Section 108, which excludes some income from the discharge of debt, causes the taxpayer to lose various
“tax attributes” as a result.
These may include basis, a net operating loss carryover, a capital loss carryover, or various credits.
Section 108, which excludes some income from the discharge of debt, causes the taxpayer to lose various
“tax attributes” as a result.
These may include basis, a net operating loss carryover, a capital loss carryover, or various credits.
Be careful about the order in which tax attributes are
reduced under 108(b).
Be careful about the order in which tax attributes are
reduced under 108(b).Recall:
We discussed section 108 in relation to the Whether issue:
Recall:
We discussed section 108 in relation to the Whether issue:
© Steven J. Willis 2008. All Rights Reserved. 237
Survey of Income Tax Slides
Section 108, which excludes some income from the discharge of debt, causes the taxpayer to lose various
“tax attributes” as a result.
These may include basis, a net operating loss carryover, a capital loss carryover, or various credits.
Section 108, which excludes some income from the discharge of debt, causes the taxpayer to lose various
“tax attributes” as a result.
These may include basis, a net operating loss carryover, a capital loss carryover, or various credits.
Be careful about the order in which tax attributes are
reduced under 108(b).
Be careful about the order in which tax attributes are
reduced under 108(b).
© Steven J. Willis 2006 68
Introduction to Tax Issues
WhetherWhether deduction
income
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 103§ 103
§ 71(c)§ 71(c)
§ 102§ 102
§ 104§ 104
§ 106§ 106
§ 117§ 117
§ 121§ 121
§ 115§ 115
§ 108§ 108
§ 125§ 125
Excludes income from some discharges of
indebtedness.
Excludes income from some discharges of
indebtedness.
Recall:
We discussed section 108 in relation to the Whether issue:
Recall:
We discussed section 108 in relation to the Whether issue:
© Steven J. Willis 2008. All Rights Reserved. 238
Survey of Income Tax Slides
Section 108, which excludes some income from the discharge of debt, causes the taxpayer to lose various
“tax attributes” as a result.
These may include basis, a net operating loss carryover, a capital loss carryover, or various credits.
Section 108, which excludes some income from the discharge of debt, causes the taxpayer to lose various
“tax attributes” as a result.
These may include basis, a net operating loss carryover, a capital loss carryover, or various credits.
Be careful about the order in which tax attributes are
reduced under 108(b).
Be careful about the order in which tax attributes are
reduced under 108(b).
© Steven J. Willis 2006 68
Introduction to Tax IssuesIntroduction to Tax Issues
WhetherWhether deductiondeduction
incomeincome
RecognizedRecognized
Not Recognized
Not Recognized
AllowedAllowed
DisallowedDisallowed
ExcludedExcluded
DeferredDeferred
§ 103§ 103
§ 71(c)§ 71(c)
§ 102§ 102
§ 104§ 104
§ 106§ 106
§ 117§ 117
§ 121§ 121
§ 115§ 115
§ 108§ 108
§ 125§ 125
Excludes income from some discharges of
indebtedness.
Excludes income from some discharges of
indebtedness.
Recall:
We discussed section 108 in relation to the Whether issue:
Recall:
We discussed section 108 in relation to the Whether issue:
The tax price of this exclusion is
the loss of attributes, which
include the possible section
1017 basis reduction.
The tax price of this exclusion is
the loss of attributes, which
include the possible section
1017 basis reduction.
© Steven J. Willis 2008. All Rights Reserved. 239
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
10121012
10141014
10151015
10161016
10171017
Section 1017 provides that a taxpayer’s basis may drop as a result of
“discharge of indebtedness” income excluded under section
108.
Section 1017 provides that a taxpayer’s basis may drop as a result of
“discharge of indebtedness” income excluded under section
108.
© Steven J. Willis 2008. All Rights Reserved. 240
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
10121012
10141014
10151015
10161016
10171017
Section 1017 provides that a taxpayer’s basis may drop as a result of
“discharge of indebtedness” income excluded under section
108.
Section 1017 provides that a taxpayer’s basis may drop as a result of
“discharge of indebtedness” income excluded under section
108.
“Discharge of indebtedness” is on the Top Topics list.
“Discharge of indebtedness” is on the Top Topics list.
© Steven J. Willis 2008. All Rights Reserved. 241
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
10121012
10141014
10151015
10161016
10171017
Section 1017 provides that a taxpayer’s basis or
other “tax attributes” drop as a result of
“discharge of indebtedness” income excluded under section
108.
Section 1017 provides that a taxpayer’s basis or
other “tax attributes” drop as a result of
“discharge of indebtedness” income excluded under section
108.
Section 108 is one of the Top
100 Code Sections.
Section 108 is one of the Top
100 Code Sections.
© Steven J. Willis 2008. All Rights Reserved. 242
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
10121012
10141014
10151015
10161016
10171017
10411041
© Steven J. Willis 2008. All Rights Reserved. 243
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized 10011001
10111011
10121012
10141014
10151015
10161016
10171017
10411041
Section 1041 provides that a taxpayer’s basis in property received from a spouse (or former spouse incident to
divorce) equals the transferor’s basis (even if it is
purchased for a greater or lesser amount).
Section 1041 provides that a taxpayer’s basis in property received from a spouse (or former spouse incident to
divorce) equals the transferor’s basis (even if it is
purchased for a greater or lesser amount).
© Steven J. Willis 2008. All Rights Reserved. 244
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
LimitationsLimitationsIn addition to issues
involving amount realized and basis,
many deductions are subject to limitations.
© Steven J. Willis 2008. All Rights Reserved. 245
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
LimitationsLimitations
The following slides have examples of
deduction Limitations with which you should
be familiar.
Some are on the Top 100 List.
The following slides have examples of
deduction Limitations with which you should
be familiar.
Some are on the Top 100 List.
© Steven J. Willis 2008. All Rights Reserved. 246
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
LimitationsLimitations
6363
© Steven J. Willis 2008. All Rights Reserved. 247
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
LimitationsLimitations
6363
Section 63 defines taxable income. It limits a taxpayer to the greater of the
itemized deductions or standard deduction.
Section 63 defines taxable income. It limits a taxpayer to the greater of the
itemized deductions or standard deduction.
© Steven J. Willis 2008. All Rights Reserved. 248
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
LimitationsLimitations
6363
6767
© Steven J. Willis 2008. All Rights Reserved. 249
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
LimitationsLimitations
6363
6767
Section 67 provides a 2% floor on excess itemized deductions: amounts below the
floor are not deductible.
Section 67 provides a 2% floor on excess itemized deductions: amounts below the
floor are not deductible.
© Steven J. Willis 2008. All Rights Reserved. 250
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
LimitationsLimitations
6363
6767
6868
© Steven J. Willis 2008. All Rights Reserved. 251
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
LimitationsLimitations
6363
6767
6868
Section 68 limits or “phases out” some itemized deductions
for higher income taxpayers.
Section 68 limits or “phases out” some itemized deductions
for higher income taxpayers.
© Steven J. Willis 2008. All Rights Reserved. 252
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
LimitationsLimitations
6363
6767
6868
213213
© Steven J. Willis 2008. All Rights Reserved. 253
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
LimitationsLimitations
6363
6767
6868
213213Section 213 limits medical deductions to the amounts in excess of 7.5% of
adjusted gross income.
Section 213 limits medical deductions to the amounts in excess of 7.5% of
adjusted gross income.
© Steven J. Willis 2008. All Rights Reserved. 254
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
LimitationsLimitations
6363
6767
6868
213213
221221
© Steven J. Willis 2008. All Rights Reserved. 255
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
LimitationsLimitations
6363
6767
6868
213213
221221
Section 221 limits the deductibility of
interest on education loans.
Section 221 limits the deductibility of
interest on education loans.
© Steven J. Willis 2008. All Rights Reserved. 256
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
LimitationsLimitations
6363
6767
6868
213213
221221
222222
© Steven J. Willis 2008. All Rights Reserved. 257
Survey of Income Tax Slides
How MuchHow Much deduction
income
BasisBasis
Amount Realized Amount Realized
LimitationsLimitations
6363
6767
6868
213213
221221
222222
Section 222 limits the deductibility of
qualified tuition and related expenses.
Section 222 limits the deductibility of
qualified tuition and related expenses.
© Steven J. Willis 2008. All Rights Reserved. 258
Survey of Income Tax Slides
WhetherWhether
WhenWhen
WhoWho
How MuchHow Much
CharacterCharacter
IssuesIssues
deduction
income
deduction
income
deduction
income
deduction
income
deduction
income
© Steven J. Willis 2008. All Rights Reserved. 259
Survey of Income Tax Slides
WhetherWhether
WhenWhen
WhoWho
How MuchHow Much
CharacterCharacter
IssuesIssues
deduction
income
deduction
income
deduction
income
deduction
income
deduction
income
© Steven J. Willis 2008. All Rights Reserved. 260
Survey of Income Tax Slides
CharacterCharacter deduction
income
© Steven J. Willis 2008. All Rights Reserved. 261
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
© Steven J. Willis 2008. All Rights Reserved. 262
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
© Steven J. Willis 2008. All Rights Reserved. 263
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
6464
Sections 64 and 65 very generally define ordinary income and ordinary deductions.
Essentially, ordinary income and deductions are simply income and deductions taxed at regular rates under section 1.
They are the default character – but with many subcategories, as we shall see later.
6565
© Steven J. Willis 2008. All Rights Reserved. 264
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
6464
Sections 64 and 65 very generally define ordinary income and ordinary deductions.
Essentially, ordinary income and deductions are simply income and deductions taxed at regular rates under section 1.
They are the default character – but with many subcategories, as we shall see later.
6565
© Steven J. Willis 2008. All Rights Reserved. 265
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
6464
Sections 64 and 65 very generally define ordinary income and ordinary deductions.
Essentially, ordinary income and deductions are simply income and deductions taxed at regular rates under section 1.
They are the default character – but with many subcategories, as we shall see later.
6565
© Steven J. Willis 2008. All Rights Reserved. 266
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
6464
Sections 64 and 65 very generally define ordinary income and ordinary deductions.
Essentially, ordinary income and deductions are simply income and deductions taxed at regular rates under section 1.
They are the default character – but with many subcategories, as we shall see later.
6565
© Steven J. Willis 2008. All Rights Reserved. 267
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
Section 1(h) subjects some capital gains to lower tax rates than those to which ordinary income is subject.
Other sections, as we shall see limit the deductibility of capital losses.
1(h)1(h)
6464
6565
© Steven J. Willis 2008. All Rights Reserved. 268
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
Section 1(h) subjects some capital gains to lower tax rates than those to which ordinary income is subject.
Other sections, as we shall see limit the deductibility of capital losses.
1(h)1(h)
6464
6565
© Steven J. Willis 2008. All Rights Reserved. 269
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
These are the two basic characters
of income and deductions, gains
and losses.
© Steven J. Willis 2008. All Rights Reserved. 270
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
These are the two basic characters
of income and deductions, gains
and losses.
Each, as we shall see, divides into several
sub-categories.
© Steven J. Willis 2008. All Rights Reserved. 271
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
A third fundamental
character fits in between ordinary
and capital.
© Steven J. Willis 2008. All Rights Reserved. 272
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
12311231
A third fundamental
character fits in between ordinary
and capital.
© Steven J. Willis 2008. All Rights Reserved. 273
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
12311231
A third fundamental
character fits in between ordinary
and capital.
Section 1231 gains and losses are sometimes Ordinary and
sometimes Capital.
© Steven J. Willis 2008. All Rights Reserved. 274
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
12311231
A third fundamental
character fits in between ordinary
and capital.
Section 1231 gains and losses are sometimes Ordinary and
sometimes Capital.
© Steven J. Willis 2008. All Rights Reserved. 275
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
12311231
A third fundamental
character fits in between ordinary
and capital.
Section 1231 gains and losses are sometimes Ordinary and
sometimes Capital.
Section 1231 applies, in general, to depreciable
trade or business property.
Section 1231 applies, in general, to depreciable
trade or business property.
© Steven J. Willis 2008. All Rights Reserved. 276
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
12311231
A third fundamental
character fits in between ordinary
and capital.
Section 1231 gains and losses are sometimes Ordinary and
sometimes Capital.
Section 1231 applies, in general, to depreciable
trade or business property.
Section 1231 applies, in general, to depreciable
trade or business property.
Section 1231 is on the Top 100 Sections List.
1231 Property is also a Top Topic.
Section 1231 is on the Top 100 Sections List.
1231 Property is also a Top Topic.
© Steven J. Willis 2008. All Rights Reserved. 277
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
Ordinary Income and Deductions fall into many categories.
© Steven J. Willis 2008. All Rights Reserved. 278
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
© Steven J. Willis 2008. All Rights Reserved. 279
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive 469469
© Steven J. Willis 2008. All Rights Reserved. 280
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive 469469
Section 469 defines passive activities. It generally limits passive deductions to the
amount of income from passive activities.
Section 469 defines passive activities. It generally limits passive deductions to the
amount of income from passive activities.
© Steven J. Willis 2008. All Rights Reserved. 281
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive 469469
Section 469 defines passive activities. It generally limits passive deductions to the
amount of income from passive activities.
Section 469 defines passive activities. It generally limits passive deductions to the
amount of income from passive activities.
A course in tax school will cover this complicated
section.
© Steven J. Willis 2008. All Rights Reserved. 282
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
© Steven J. Willis 2008. All Rights Reserved. 283
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment 163(d)163(d)
© Steven J. Willis 2008. All Rights Reserved. 284
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment 163(d)163(d)
Section 163(d) defines investment income. It generally
limits investment interest deductions to the amount of net
investment income.
Section 163(d) defines investment income. It generally
limits investment interest deductions to the amount of net
investment income.
© Steven J. Willis 2008. All Rights Reserved. 285
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment 163(d)163(d)
Section 163(d) defines investment income. It generally
limits investment interest deductions to the amount of net
investment income.
Section 163(d) defines investment income. It generally
limits investment interest deductions to the amount of net
investment income.
A course in tax school will cover this complicated
section.
© Steven J. Willis 2008. All Rights Reserved. 286
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
© Steven J. Willis 2008. All Rights Reserved. 287
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering 165(d)165(d)
© Steven J. Willis 2008. All Rights Reserved. 288
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering 165(d)165(d)
Section 165(d) limits wagering losses to the amount of
wagering winnings.
Section 165(d) limits wagering losses to the amount of
wagering winnings.
© Steven J. Willis 2008. All Rights Reserved. 289
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Most “ordinary” income is just that: ordinary . . . it is not classified in a sub-
category.
Most “ordinary” income is just that: ordinary . . . it is not classified in a sub-
category.
© Steven J. Willis 2008. All Rights Reserved. 290
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Short TermShort Term
© Steven J. Willis 2008. All Rights Reserved. 291
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Short TermShort Term
Per section 1222, short term gains and losses result from the
sale or exchange of capital assets held for one year or less.
Per section 1222, short term gains and losses result from the
sale or exchange of capital assets held for one year or less.
© Steven J. Willis 2008. All Rights Reserved. 292
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Short TermShort Term
Long TermLong Term
© Steven J. Willis 2008. All Rights Reserved. 293
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Short TermShort Term
Long TermLong Term
Per section 1222, long term gains and losses result from the
sale or exchange of capital assets held for more than one
year.
Per section 1222, long term gains and losses result from the
sale or exchange of capital assets held for more than one
year.
© Steven J. Willis 2008. All Rights Reserved. 294
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Short TermShort Term
Long TermLong Term
CollectiblesCollectibles
© Steven J. Willis 2008. All Rights Reserved. 295
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Short TermShort Term
Long TermLong Term
CollectiblesCollectiblesPer sections 1(h)(6) and 408(m), collectibles gains and losses
result from the sale or exchange of “collectibles” held for more
than one year.
Per sections 1(h)(6) and 408(m), collectibles gains and losses
result from the sale or exchange of “collectibles” held for more
than one year.
© Steven J. Willis 2008. All Rights Reserved. 296
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Many important code sections affect
Capital Gains and Losses.
© Steven J. Willis 2008. All Rights Reserved. 297
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Many important code sections affect
Capital Gains and Losses.
You should know these code sections.The
following slides briefly discuss them.
Each section is on the Top 100 List.
You should know these code sections.The
following slides briefly discuss them.
Each section is on the Top 100 List.
© Steven J. Willis 2008. All Rights Reserved. 298
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
12211221
© Steven J. Willis 2008. All Rights Reserved. 299
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1221 defines a capital asset as all property other than
8 listed types of property.
Section 1221 defines a capital asset as all property other than
8 listed types of property.
12211221
© Steven J. Willis 2008. All Rights Reserved. 300
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1221 defines a capital asset as all property other than
8 listed types of property.
Section 1221 defines a capital asset as all property other than
8 listed types of property.
12211221
The Corn Products Refining Co. v. Comm'r, 350 U.S. 46 (1955) and
Arkansas Best v. Comm'r, 485 U.S. 212 (1988) cases discussed
whether this list is exclusive or illustrative.
The Corn Products Refining Co. v. Comm'r, 350 U.S. 46 (1955) and
Arkansas Best v. Comm'r, 485 U.S. 212 (1988) cases discussed
whether this list is exclusive or illustrative.
© Steven J. Willis 2008. All Rights Reserved. 301
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1221 defines a capital asset as all property other than
8 listed types of property.
Section 1221 defines a capital asset as all property other than
8 listed types of property.
12211221
The Corn Products Refining Co. v. Comm'r, 350 U.S. 46 (1955) and
Arkansas Best v. Comm'r, 485 U.S. 212 (1988) cases discussed
whether this list is exclusive or illustrative.
The Corn Products Refining Co. v. Comm'r, 350 U.S. 46 (1955) and
Arkansas Best v. Comm'r, 485 U.S. 212 (1988) cases discussed
whether this list is exclusive or illustrative.
© Steven J. Willis 2008. All Rights Reserved. 302
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1221 defines a capital asset as all property other than
8 listed types of property.
Section 1221 defines a capital asset as all property other than
8 listed types of property.
12211221
The Corn Products Refining Co. v. Comm'r, 350 U.S. 46 (1955) and
Arkansas Best v. Comm'r, 485 U.S. 212 (1988) cases discussed
whether this list is exclusive or illustrative.
The Corn Products Refining Co. v. Comm'r, 350 U.S. 46 (1955) and
Arkansas Best v. Comm'r, 485 U.S. 212 (1988) cases discussed
whether this list is exclusive or illustrative.
These cases are on the
top 100 list.
These cases are on the
top 100 list.
© Steven J. Willis 2008. All Rights Reserved. 303
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1221 defines a capital asset as all property other than
8 listed types of property.
Section 1221 defines a capital asset as all property other than
8 listed types of property.
12211221
© Steven J. Willis 2008. All Rights Reserved. 304
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1221 defines a capital asset as all property other than
8 listed types of property.
Section 1221 defines a capital asset as all property other than
8 listed types of property.
12211221
The definition of property for tax purposes is not entirely
clear.
It does not, according to many cases, include ordinary
income streams or rights.
The definition of property for tax purposes is not entirely
clear.
It does not, according to many cases, include ordinary
income streams or rights.
© Steven J. Willis 2008. All Rights Reserved. 305
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1221 defines a capital asset as all property other than
8 listed types of property.
Section 1221 defines a capital asset as all property other than
8 listed types of property.
12211221
The definition of property for tax purposes is not entirely
clear.
It does not, according to many cases, include ordinary
income streams or rights.
The definition of property for tax purposes is not entirely
clear.
It does not, according to many cases, include ordinary
income streams or rights.
© Steven J. Willis 2008. All Rights Reserved. 306
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1221 defines a capital asset as all property other than
8 listed types of property.
Section 1221 defines a capital asset as all property other than
8 listed types of property.
12211221
The definition of property for tax purposes is not entirely
clear.
It does not, according to many cases, include ordinary
income streams or rights.
The definition of property for tax purposes is not entirely
clear.
It does not, according to many cases, include ordinary
income streams or rights.
The case of Comm’r v. P.G. Lake Inc., 356 U.S. 260 (1958) refined the acceleration of
income doctrine. A taxpayer who separates and sells or exchanges the
income element of property rights separate from the underlying property
accelerates income as ordinary into the current year.
The case of Comm’r v. P.G. Lake Inc., 356 U.S. 260 (1958) refined the acceleration of
income doctrine. A taxpayer who separates and sells or exchanges the
income element of property rights separate from the underlying property
accelerates income as ordinary into the current year.
© Steven J. Willis 2008. All Rights Reserved. 307
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1221 defines a capital asset as all property other than
8 listed types of property.
Section 1221 defines a capital asset as all property other than
8 listed types of property.
12211221
The definition of property for tax purposes is not entirely
clear.
It does not, according to many cases, include ordinary
income streams or rights.
The definition of property for tax purposes is not entirely
clear.
It does not, according to many cases, include ordinary
income streams or rights.
The case of Comm’r v. P.G. Lake Inc., 356 U.S. 260 (1958) refined the acceleration of
income doctrine. A taxpayer who separates and sells or exchanges the
income element of property rights separate from the underlying property
accelerates income as ordinary into the current year.
The case of Comm’r v. P.G. Lake Inc., 356 U.S. 260 (1958) refined the acceleration of
income doctrine. A taxpayer who separates and sells or exchanges the
income element of property rights separate from the underlying property
accelerates income as ordinary into the current year.
This case is on the top
100 list.
This case is on the top
100 list.
© Steven J. Willis 2008. All Rights Reserved. 308
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
12211221
12221222
© Steven J. Willis 2008. All Rights Reserved. 309
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1222 defines long and short term
gains.
Section 1222 defines long and short term
gains.
12211221
12221222
© Steven J. Willis 2008. All Rights Reserved. 310
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1222 defines long and short term
gains.
Section 1222 defines long and short term
gains.
12211221
12221222
The critical factors are:
1. long-term gains and losses result from capital assets held more than one year; and
2. Capital gains and losses result from the sale or exchange of capital assets.
The critical factors are:
1. long-term gains and losses result from capital assets held more than one year; and
2. Capital gains and losses result from the sale or exchange of capital assets.
© Steven J. Willis 2008. All Rights Reserved. 311
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1222 defines long and short term
gains.
Section 1222 defines long and short term
gains.
12211221
12221222
The critical factors are:
1. long-term gains and losses result from capital assets held more than one year; and
2. Capital gains and losses result from the sale or exchange of capital assets.
The critical factors are:
1. long-term gains and losses result from capital assets held more than one year; and
2. Capital gains and losses result from the sale or exchange of capital assets.
© Steven J. Willis 2008. All Rights Reserved. 312
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1222 defines long and short term
gains.
Section 1222 defines long and short term
gains.
12211221
12221222
The critical factors are:
1. long-term gains and losses result from capital assets held more than one year; and
2. Capital gains and losses result from the sale or exchange of capital assets.
The critical factors are:
1. long-term gains and losses result from capital assets held more than one year; and
2. Capital gains and losses result from the sale or exchange of capital assets.
© Steven J. Willis 2008. All Rights Reserved. 313
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
12211221
12221222
12231223
© Steven J. Willis 2008. All Rights Reserved. 314
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1223 defines the holding period of
capital assets.
Section 1223 defines the holding period of
capital assets.
12211221
12221222
12231223
© Steven J. Willis 2008. All Rights Reserved. 315
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1223 defines the holding period of
capital assets.
Section 1223 defines the holding period of
capital assets.
12211221
12221222
12231223
Some critical examples are:
1. Per 1223(1), property includes the holding period of other property transferred in a tax- free exchange; and
2. Per 1223(2), property includes the holding period of the donor of the property.
3. Per 1223(11), property received from a decedent with a section 1015 stepped-up basis is automatically long-term.
Some critical examples are:
1. Per 1223(1), property includes the holding period of other property transferred in a tax- free exchange; and
2. Per 1223(2), property includes the holding period of the donor of the property.
3. Per 1223(11), property received from a decedent with a section 1015 stepped-up basis is automatically long-term.
© Steven J. Willis 2008. All Rights Reserved. 316
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1223 defines the holding period of
capital assets.
Section 1223 defines the holding period of
capital assets.
12211221
12221222
12231223
Some critical examples are:
1. Per 1223(1), property includes the holding period of other property transferred in a tax- free exchange; and
2. Per 1223(2), property includes the holding period of the donor of the property.
3. Per 1223(11), property received from a decedent with a section 1015 stepped-up basis is automatically long-term.
Some critical examples are:
1. Per 1223(1), property includes the holding period of other property transferred in a tax- free exchange; and
2. Per 1223(2), property includes the holding period of the donor of the property.
3. Per 1223(11), property received from a decedent with a section 1015 stepped-up basis is automatically long-term.
© Steven J. Willis 2008. All Rights Reserved. 317
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1223 defines the holding period of
capital assets.
Section 1223 defines the holding period of
capital assets.
12211221
12221222
12231223
Some critical examples are:
1. Per 1223(1), property includes the holding period of other property transferred in a tax- free exchange; and
2. Per 1223(2), property includes the holding period of the donor of the property.
3. Per 1223(11), property received from a decedent with a section 1015 stepped-up basis is automatically long-term.
Some critical examples are:
1. Per 1223(1), property includes the holding period of other property transferred in a tax- free exchange; and
2. Per 1223(2), property includes the holding period of the donor of the property.
3. Per 1223(11), property received from a decedent with a section 1015 stepped-up basis is automatically long-term.
© Steven J. Willis 2008. All Rights Reserved. 318
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
12111211
12211221
12221222
12231223
© Steven J. Willis 2008. All Rights Reserved. 319
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1211 limits the deductibility of
capital losses to the extent of capital
gains plus $3000.
Section 1211 limits the deductibility of
capital losses to the extent of capital
gains plus $3000.
12111211
12211221
12221222
12231223
© Steven J. Willis 2008. All Rights Reserved. 320
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
12111211
12121212
12211221
12221222
12231223
© Steven J. Willis 2008. All Rights Reserved. 321
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1212 provides for capital
loss carryovers.
Section 1212 provides for capital
loss carryovers.
12111211
12121212
12211221
12221222
12231223
© Steven J. Willis 2008. All Rights Reserved. 322
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
12111211
12121212
12211221
12221222
12231223
12351235
© Steven J. Willis 2008. All Rights Reserved. 323
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1235 provides for long- term capital gain
treatment on many transfers of an
interest in a patent.
Section 1235 provides for long- term capital gain
treatment on many transfers of an
interest in a patent.
12111211
12121212
12211221
12221222
12231223
12351235
© Steven J. Willis 2008. All Rights Reserved. 324
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
12111211
12121212
12211221
12221222
12231223
12351235
12371237
© Steven J. Willis 2008. All Rights Reserved. 325
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1237 provides a limited
safe-harbor resulting in capital gain
treatment for some property subdivided
for sale.
Section 1237 provides a limited
safe-harbor resulting in capital gain
treatment for some property subdivided
for sale.
12111211
12121212
12211221
12221222
12231223
12351235
12371237
© Steven J. Willis 2008. All Rights Reserved. 326
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
12111211
12121212
12211221
12221222
12231223
12351235
12371237
12391239
© Steven J. Willis 2008. All Rights Reserved. 327
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1239 forces ordinary treatment for gain on the sale
of depreciable property between related taxpayers.
Section 1239 forces ordinary treatment for gain on the sale
of depreciable property between related taxpayers.
12111211
12121212
12211221
12221222
12231223
12351235
12371237
12391239
© Steven J. Willis 2008. All Rights Reserved. 328
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
12111211
12121212
12211221
12221222
12231223
12351235
12371237
12391239
12441244
© Steven J. Willis 2008. All Rights Reserved. 329
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1244 provides for ordinary loss
treatment on the sale of some small
business stock.
Section 1244 provides for ordinary loss
treatment on the sale of some small
business stock.
12111211
12121212
12211221
12221222
12231223
12351235
12371237
12391239
12441244
© Steven J. Willis 2008. All Rights Reserved. 330
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
12111211
12121212
12211221
12221222
12231223
12351235
12371237
12391239
12441244
12711271
© Steven J. Willis 2008. All Rights Reserved. 331
Survey of Income Tax Slides
CharacterCharacter deduction
income
OrdinaryOrdinary
CapitalCapital
PassivePassive
InvestmentInvestment
WageringWagering
Section 1271 imputes sale or
exchange treatment for the collection or retirement of some
obligations.
Section 1271 imputes sale or
exchange treatment for the collection or retirement of some
obligations.
12111211
12121212
12211221
12221222
12231223
12351235
12371237
12391239
12441244
12711271