Law Outlines Federal Income Tax (Duke Zelenak) Outlines
Federal Income Taxation outline for Professor Zelenak from Duke Law...
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Generally, sources does not matter under the definition of gross income (Glenshaw Glass)
Windfall gains are also taxable, especially because there is no deadweight loss
Tax-free capital recovery is allowed
Amount realized - adjusted basis = gain realized Section 1001
Amount realized is the cash received by the taxpayer plus the fair market value of any non-cash property received
Section 1012 defines a taxpayer’s basis in an asset as the cost of such property
Tax refund
Itemize deduction: wage withholding refund taxable to the extent itemized deduction exceeds standardized deduction
If the refund is larger than the amount that itemized deduction exceeds standardized deduction, the amount that itemized deduction exceeds the standardized deduction is taxable
if smaller, the entirety of the refund is taxable
Standard deduction: wage withholding refund not taxable
Gifts and Bequests
Section 102(a) excludes gifts and bequests from the gross income of the donee or heir.
Section 102(c) stipulates that a gift from an employer to an employee is not excludable
Section 274(b) denies the transferor a business expense deduction for any business gift, to the extent the total value of gifts exceeds 25 dollars
Damages on account of personal physical injuries
Section 104(a)(2) excludes from gross income any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness
Applies to all three major types of compensatory damage:
Nonpecuniary damages for pain and suffering or loss of enjoyment
Damages for medical expenses, past and future
Damages for lost wages, past and future
Problem 1 p102
IIED, §104(a) flush language:
10k medical expenses - excludable
90k (lost wages, non-pecuniary damages) - not excludable
Regulation 1.104 - emotional distress not physical injury, but damages for emotional distress attributable to a physical injury are excludable.
Problem 2
Loss of consortium, excludable according to legislative history
Problem 3
Amount realized - adjusted basis = gain realized
Amount realized= 120k, adjusted basis= 100k
Problem 4
everything will be excludable
Incentive for structured settlement as opposed to trial
Non cash income is generally taxable. An objective measure of fair market value must be employed to measure compensation received in goods or services (Rooney)
If services are paid for in exchange for other services, the FMV of such other services taken in payment must be included in income as compensation, including lodging.
Exceptions:
Prize contest winnings: Rev. Rul. 57-374 If win in prize contest, can choose not to accept it and do not have to include in GI. Constructive receipt does not apply here.
Section 119 provides an exclusion from gross income for the value of meals and lodging furnished by an employer to an employee, if the meals and lodging are furnished on the employer’s business premises for the convenience of the employer.
Imputed income
Gratuitous service for yourself or family is imputed income, and is not included in gross income
Problem 6 P119: it’s imputed income: imputed income also include work you do gratuitously for other people (neighbors looking after each other’s lawn when the other goes on vacation)
Problem 7: imputed income (babysitting each other’s baby)
Problem 8: selling the house painted by yourself. If the painting still has value, then you will turn the initial exclusion of the painting into a deferral.
Problem 9: two visiting professors swapping house, not imputed income, there is an exchange.
Unrealized appreciation
Unrealized appreciation is not included in your gross income
Employer-provided health insurance
Section 106 excludes from the gross income of an employee the value of employer-provided health insurance coverage (premiums)
Section 105(b) excludes from gross income the value of benefits received under employer-provided health insurance, to the extend the benefits constitute reimbursement of medical expenses (benefits)
Section 125 cafeteria plan: a taxpayer who is offered a choice between cash and health insurance coverage, and who chooses insurance, will not be taxed under the doctrine of constructive receipt.
For taxpayers not insured through the employers
Section 213 allows them to claim their medical expenses as itemized deductions. However, medical expenses are deductible only to the extent they exceed 10 percent of adjusted gross income.
Section 36B provides a refundable premium assistance credit for low and moderate income taxpayer purchasing health insurance through a state-based health insurance exchange.
Self-employed: section 162(l): taxpayer can claim above-the-line deduction for cost of healthcare (counts as business rather than medical expense)
Scholarship and other tax benefits for higher education expenses
Section 117(a) excludes from gross income any amount received as a qualified scholarship by an individual who is a candidate for a degree at a college or university. The exclusion is limited to the amount of the student’s tuition and fees.
Section 117(c) provides that the exclusion does not apply to any amount received which represents payment for teaching, research, or other services by the student required as a condition for receiving the qualified scholarship.
Scholarship to children of EEs must meet certain requirements to show not based on compensation incentive or expectation: Rev. Proc. 76-47
Must be based on merit
No more than 25% of eligible children get scholarship in any given year
Hope Scholarship Credit: §25A(b)
Per student cap of 100% of first $1000 + 50% of second $1000 = $1500 total cap
Tuition and fees for first 2 years of college
Claimed by whoever pays the tuition
Now in effect is the temporary rule:
100% of first 2000 +...
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Federal Income Taxation outline for Professor Zelenak from Duke Law...
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