Chapter 3 Gross incomer Inclusions
Chapter 3 Gross Income: Inclusions
Learning objectives Explain the difference between economic, accounting, and tax concepts of income Explain the principles used to determine who is taxed on a particular item of income
Learning Objectives • Explain the difference between economic, accounting, and tax concepts of income • Explain the principles used to determine who is taxed on a particular item of income
Learning objectives Determine when a particular item of income is taxable under both the cash and accrual methods of accounting Apply the rules of sec. 61a to determine whether such items as compensationg dividends, alimony and pensions are taxable
Learning Objectives • Determine when a particular item of income is taxable under both the cash and accrual methods of accounting • Apply the rules of sec. 61(a) to determine whether such items as compensation, dividends, alimony, and pensions are taxable
Concepts of Income 三 CONOMIC ACCOUNTING wealth that values are flows to measured by a individuals transaction changes in value in individuals appr。ach wealth income realized unrealized gains as a result of gifts completed inheritances are transactions considered Icome use historical cost
Concepts Of Income ECONOMIC – wealth that flows to individuals – changes in value in individuals’ wealth • unrealized gains • gifts & inheritances are considered income ACCOUNTING – values are measured by a transaction approach – income realized as a result of completed transactions – use historical cost
Tax Concept Of Income · The tax c。 ncept of income has adopted the accountants concept of income The reasons for this generally relates to Administrative convenience concept Wherewithal to pay concept
Tax Concept Of Income • The tax concept of income has adopted the accountant’s concept of income. • The reasons for this generally relates to – Administrative convenience concept & – Wherewithal to pay concept
Tax Concept Of Income Administrative convenience concept the economic concept is considered too subjective. objectivity is achieved at the price of equity
Tax Concept Of Income • Administrative convenience concept – the economic concept is considered too subjective. – Objectivity is achieved at the price of equity
Tax Concept Of Income Wherewithal to pay concept A tax should be collected when the taxpayer can most easily pay
Tax Concept Of Income • Wherewithal to pay concept – A tax should be collected when the taxpayer can most easily pay
Gross ncome Defined Section 61a defines gross income as all income from whatever source derived, including(but not limited to) the following items Compensation for services, fees commissions and similar items Gross income derived from business Gains from dealings in property Interest
Gross Income Defined • Section 61(a) defines gross income as “all income from whatever source derived,” including (but not limited to) the following items: – Compensation for services, fees, commissions, and similar items – Gross income derived from business – Gains from dealings in property – Interest
Gross Income Deffined Rents Royalties Dividends Alimony and separate maintenance agreements Annuities Life insurance and endowments Pensions Income from discharge of indebtedness Distributive share from partnership Income in respect of a decedent Income from an interest in an estate or trust
Gross Income Defined – Rents – Royalties – Dividends – Alimony and separate maintenance agreements – Annuities – Life insurance and endowments – Pensions – Income from discharge of indebtedness – Distributive share from partnership – Income in respect of a decedent – Income from an interest in an estate or trust
Gross ncome Defined o Gross income is not limited to amounts received in the form of cash Reg. Sec. 1.61-1ay income may be“ realized in any form whether in money, property, and services yy
Gross Income Defined • Gross income is not limited to amounts received in the form of cash. • Reg. Sec. 1.61-1a, income may be “realized in any form, whether in money, property, and services
