Tax and Tax

TAXATION I OUTLINE

PROFESSOR UTZMAN

I. Introduction:

A. Introduction:

1. Suggestions from Utzman on approaching this class:

a. This is a statutory class — before reading each section in the textbook, read the code to get a flavor of what it contains.

b. Also, read the regulations to get a flavor of what it contains.

c. Then, go back and read the code and the regulations after being taught.

2. In tax, everything is income — then you exclude something to get an adjusted income — then you take deductions to figure out taxable income.

3. Citing the Internal Revenue Code:

• 26 U.S.C. §61(a)

• I.R.C. §61(a)

• Treas. Reg. 1.61-1

II. Identification of Income Subject to Taxation:

A. Gross Income: The Scope of Section 61:

1. We need a definition of income because of due process concerns — we need a law that everybody recognizes.

2. WHAT IS INCOME?

a. §61 defines gross income as “all income from whatever source derived.”

1) §61 lists 15 specific items that are considered income.

b. Cesarini v. United States: The Cesarinis found $4,467 in cash in a used piano purchased by them.

1) The court held that the found money is taxable as ordinary income in the year in which the taxpayer attains uncontested possession of it.

2) INCOME: Treasure Trove: It is considered income in the year that it is reduced to undisputed possession.

c. Commissioner v. Glenshaw Glass Co.: Glenshaw Glass Co. recovered compensatory and punitive damages as a result of a fraud and anti-trust suit. It did not report the punitive damages as income and the IRS assessed a deficiency....