Federal Income Tax: A Student's Guide to the Internal Revenue Code

by Kahn, Douglas A.

• ISBN13: 9781566627139
• ISBN10: 1566627133
• Edition: 4th
• Format: Paperback
• Copyright: 1999-08-01
• Publisher: FOUNDATION PRESS INC

Table of Contents

Introduction	1	(37)
History	1	(36)
Rate Structure	3	(2)
Indexing for Inflation	5	(1)
Retroactive Increase in Tax	5	(1)
Sources of the Tax Law	5	(1)
The Internal Revenue Code	5	(1)
Amendments	6	(1)
Legislative History	6	(1)
Treasury Department Regulations	6	(1)
Validity of Regulations	7	(1)
Retroactive Application	8	(1)
Proposed and Temporary Regulations	9	(1)
Significance of Proposed Regulations	9	(1)
Significance of Temporary Regulations	9	(1)
Revenue Rulings	9	(1)
Acquiescences	10	(1)
Information Releases	11	(1)
Internal Memoranda	11	(1)
Significance	11	(1)
Letter Rulings	12	(1)
User Fees for Seeking a Ruling	13	(1)
Tax Litigation	14	(1)
Review of Tax Court Decisions by the Entire Court	14	(1)
Memorandum Decisions of the Tax Court	14	(1)
Board of Tax Appeals (BTA)	15	(1)
Burden of Proof	15	(1)
Recovery of Litigating Costs	16	(1)
Checklist of Issues	16	(1)
Accounting for Tax Purposes	17	(1)
Accounting Period	17	(1)
Election Period	17	(1)
Short Year	17	(1)
Variable Year	17	(1)
Method of Accounting	17	(1)
Cash Receipts and Disbursements Method	17	(1)
Constructive Receipt	18	(1)
Economic Benefit	18	(1)
Accrual Method	19	(1)
Other Methods	19	(1)
Computations of Tax	20	(1)
Method of Computation	20	(1)
Illustration of Computation	20	(1)
Civil Penalties	21	(1)
Accuracy-Related Penalty	21	(3)
Fraud Penalty	24	(1)
Failure to File Return	25	(1)
Failure to Pay Tax	25	(1)
Other Penalties	25	(1)
Suspension of Penalty	26	(1)
Criminal Penalties	26	(1)
Interest on Underpayments and Overpayments	26	(1)
Interest on Penalties	27	(1)
Annual Accounting	27	(1)
Concept of Income	27	(1)
Gross Income Generally	27	(1)
Less Cost-of-Goods Sold	28	(1)
Statutory Interpretation	28	(1)
Rule-of-Thumb Test: Increase in Net Worth	28	(1)
Realization of Income or Loss	28	(1)
Illustration	29	(1)
Constitutional Limitation	29	(1)
The Concept of Basis	29	(1)
Definition	29	(1)
Use of Basis	29	(1)
Illustration 1	29	(1)
Illustration 2	30	(1)
Illustration 3	30	(1)
Determination of Basis	30	(1)
Cost Basis	30	(1)
Transferred Basis	31	(1)
Exchanged Basis	31	(1)
Illustration	31	(1)
Substituted Basis Property	31	(1)
Constructive Basis	32	(1)
Adjusted Basis	32	(1)
Capital Improvement	32	(1)
Recapture of Investment	32	(1)
Illustration	32	(1)
Mortgages and Liens	33	(1)
The Concept of Recognition	33	(1)
Effect of Nonrecognition	33	(1)
Adjustment of Basis	33	(1)
Illustration 1	33	(1)
Illustration 2	34	(1)
Illustration 3	34	(1)
Imputed Income from Property or Services	34	(1)
Home Ownership	35	(1)
Improvements	35	(1)
Services	35	(1)
Significance of State Law and Form of Transaction	35	(1)
State Law	35	(1)
Substance Versus Form	36	(1)
Economic Substance	36	(1)
Estoppel of the Commissioner	36	(1)
Gross Income	37	(192)
Items Included in and Excluded from Gross Income	37	(192)
Items Included in Gross Income	37	(1)
Borrowed Funds	37	(1)
Deposits	37	(4)
Discharge of Indebtedness	41	(1)
Income to Debtor	41	(1)
Statutory Rules	42	(1)
Distinguish Realization from Recognition and Exclusion from Nonrecognition	43	(1)
Illustration 1: Satisfaction at Less than Face Amount	43	(1)
Illustration 2: Redemption of Bonds	43	(1)
Illustration 3: Expiration of Period of Limitations	43	(1)
Illustration 4: Prepayment of Mortgage Debt at a Discount	44	(1)
Acquisition of Debt by Person Related to the Debtor	44	(1)
Related Parties	45	(1)
Direct and Indirect Acquisitions	45	(2)
Acquisition Date	47	(1)
Exceptions	47	(1)
Tax Consequences of A Direct Acquisition	48	(1)
Debtor's Recognition of Discharge of Indebtedness Income	48	(1)
Constructive Issuance of New Debt Instrument	48	(2)
Tax Consequences to the Holder Apart from OID Allocations	50	(1)
Examples	50	(3)
Tax Consequences of An Indirect Acquisition	53	(1)
Spurious Discharge of a Debt	54	(1)
Student Loans	54	(1)
Modification of the Terms of a Debt Instrument	55	(1)
Lost Deduction	56	(1)
Rationale	56	(1)
Insolvency of Debtor	56	(1)
Nonrecognition of Income	57	(1)
Reason for the Insolvency Exception	57	(1)
Nonrecourse Debts	58	(1)
Illustration 1: Insolvent Before and After Discharge	59	(1)
Illustration 2: Solvent After Discharge	59	(1)
Illustration 3: Nonrecourse Debt that is Secured by Property with a Greater Value than the Amount of the Debt	60	(1)
Illustration 4: Nonrecourse Debt that is Greater in Amount than the Property Securing It	60	(1)
Discharge of Nonrecourse Debt	61	(1)
Reduction of Tax Attributes	62	(1)
Net Operating Loss	62	(1)
General Business Credits	62	(1)
Minimum Tax Credit	62	(1)
Capital Loss	62	(1)
Basis of Property	63	(1)
Passive Activity Loss and Credit Carryovers	63	(1)
Foreign Tax Credit	63	(1)
Election to Prevent Reduction of Net Operating Loss, Capital Loss, Credits and Credit Carryovers	63	(1)
Exclusion Versus Nonrecognition	64	(1)
Qualified Farm Indebtedness and Qualified Real Property Business Indebtedness	64	(1)
Purchase-Money Debt Reduction	65	(1)
Illustration 1: Genuine Discharge	66	(1)
Illustration 2: Spurious Discharge	66	(1)
Discharge As a Gift	67	(1)
Contribution to a Corporation's Capital	67	(1)
Statutory Treatment	68	(1)
Corporation's Satisfaction of Debt With Its Own Stock	68	(1)
Tax Benefit Rule	69	(1)
Transactional View	70	(1)
Illustration 1: Charitable Pledges	71	(1)
Illustration 2: Cost of Inventory	71	(1)
Severability of Credit	72	(1)
Illustration 3: Payment from Third Party as Reduction of Purchase Price	72	(1)
Third Party's Discharge of Debt as Reduction of Purchase Price	73	(2)
Overview of Transactional Approach	75	(1)
Suggested Rationale	75	(1)
Effect of 1980 Amendment of IRC § 108	76	(1)
Discharge of an Unenforceable Debt	76	(1)
The Facts of the Zarin case	76	(2)
Harsh Result In The Tax Court	78	(1)
Application of Transactional Approach	78	(1)
The Third Circuit's Decision	79	(1)
Compensatory Damages	80	(1)
Damage to Tangible Property	81	(1)
Deduction Illustration	81	(1)
Illustration 2	82	(1)
Illustration 3	83	(1)
Recovery Not Required by Law	83	(1)
Recovery of Lost Dollars	84	(1)
Illustration 4	84	(1)
Illustration 5	85	(2)
Damage Caused to Intangible Property	87	(1)
Damage to Goodwill	87	(1)
Determining Basis in Goodwill	87	(1)
Reimbursement for Lost Profits	87	(1)
Illustration 1	88	(1)
Illustration 2	88	(1)
Illustration 3	88	(1)
Characterization of Insurance Proceeds	89	(1)
Illustration	90	(1)
Damages Received on Account of Personal Injuries	91	(1)
Tort-Type Claims	92	(1)
Physical and Nonphysical Personal Injuries	93	(1)
Illustration 1	94	(1)
Illustration 2	95	(1)
Illustration 3	95	(1)
Damages for Victims of Discrimination or Defamation	95	(1)
Punitive Damages	96	(1)
Allocation of Damages Between Punitive and Compensatory Elements	97	(2)
Allocation of Lump Sum Award or Settlement Into Its Likely Component Parts	99	(1)
Liquidated Damages	100	(1)
Rationale for Exclusion	101	(1)
Rationale for the Exclusion of Back Pay	102	(2)
Sale of Parts of Taxpayer's Body	104	(1)
Installment Payments of Damages	105	(1)
Alimony, Separate Maintenance, and Child Support	106	(1)
Alimony or Separate Maintenance Payment	106	(1)
Payments of Property in Kind	107	(1)
Cash Paid to a Third Party Pursuant to a Divorce or Separation Instrument	107	(1)
Cash Paid to a Third Party at W's Request or Ratification	107	(1)
Not Members of the Same Household	108	(1)
No Liability to Make Payments After Death of Payee Spouse	108	(1)
Lump Sum Payment Required by Divorce or Separation Instrument	108	(2)
Payment of Spouse's Legal Fees Pursuant to Divorce or Separation Instrument	110	(1)
Late Payment of Defaulted Alimony	110	(1)
No Substitute Payments	111	(1)
Illustration	112	(1)
Divorce or Separation Instrument	112	(1)
Front-Loading of Payments---Definitions of 1st, 2nd and 3rd, ``Post-Separation Years.''	112	(1)
Recapture Rules	113	(1)
Payee's Deduction of Recaptured Amount	113	(1)
Taxable Year of Payor and Payee	114	(1)
``Excess Alimony Payments''	114	(1)
Excess Payments for the Second Post-Separation Year	114	(1)
Excess Payments for the First Post-Separation Year	114	(1)
Illustration 1	115	(1)
Illustration 2	116	(1)
Illustration 3	117	(1)
Exceptions to the Recapture Rules	118	(1)
Payments Made After Remarriage	118	(2)
Treatment of Payments That Do Not Qualify as Alimony	120	(1)
Modification of Agreement in Anticipation of Divorce	120	(1)
Property Settlements	121	(1)
Transfers of Property in Kind	121	(1)
Related to the Cessation of Marriage	122	(1)
Illustration 1	123	(1)
Illustration 2	123	(2)
Divorce Trusts	125	(1)
Child Support	125	(1)
Contingency Relating to a Child	125	(1)
Illustration	126	(1)
Income Splitting	126	(1)
Marital Status	126	(1)
Rule of Validation	127	(1)
Status of the Rule of Validation	127	(1)
Sham Divorces	128	(1)
Compensation for Services	129	(1)
Cash Compensation	129	(1)
Tips	129	(1)
Services in Exchange for Services	130	(1)
Illustration	130	(1)
Property in Kind	130	(1)
Illustration 1	130	(1)
Illustration 2	131	(1)
Interest-Free and Below Market Interest Rate Loans	131	(1)
The Time Value of Money	132	(1)
Increased Significance of Deferral	132	(1)
Loans to Which IRC § 7872 Applies	133	(1)
Constructive Payment to Borrower	133	(1)
Constructive Interest Payment to Lender	134	(1)
Definitions	134	(1)
Gift Loans and Demand Loans	135	(1)
Below-Market Loans	135	(1)
Foregone Interest	135	(1)
De Minimis Exception for Gift Loans Between Individuals	135	(1)
Amount Treated as Retransferred Limited to Net Investment Income	135	(1)
Treatment of Term Loans That Are Not Gift Loans	136	(1)
Present Value	136	(1)
Discount Rate	137	(1)
Simple or Compounded Interest	137	(1)
Computation of Present Value	137	(1)
Choosing the Discount Rate	138	(1)
De Minimis Exception for Compensation-Related Loans and Corporation-Shareholder Loans	139	(1)
Exception for Certain Loans to Qualified Continuing Care Facilities	139	(1)
Exclusion of Certain Loans	140	(1)
Uncompensated Loan of Property in Kind	140	(1)
Bargain Purchases	140	(1)
Illustration 1	140	(1)
Illustration 2	141	(1)
Illustration 3	141	(1)
Stock Options	141	(1)
Problems of Valuation	141	(1)
Restrictions on Acquired Property	142	(3)
Illustration 1	145	(1)
Illustration 2	146	(1)
Illustration 3	146	(1)
Illustration 4	146	(1)
Incentive Stock Options	146	(1)
Holding and Employment Requirements	146	(1)
Other Requirements	147	(1)
Deferred Compensation	148	(1)
Nonqualified Plans	148	(1)
Illustration 1	149	(1)
Illustration 2	149	(1)
Illustration 3	150	(1)
Illustration 4	150	(1)
Rabbi Trust	150	(2)
Qualified Retirement Plans	152	(1)
Self-Employed	152	(1)
Individual Retirement Arrangements	152	(1)
Employee Life Insurance	152	(1)
Illustration	153	(1)
Group-Term Exception	153	(1)
Fringe Benefits	153	(1)
Medical Insurance Payments	153	(1)
Certain Fringe Benefits	154	(1)
No-Additional-Cost Service	154	(1)
Qualified Employee Discount	155	(1)
Limitation	155	(1)
No Discrimination	156	(1)
Certain Individuals Treated as Employees	156	(1)
Same Line of Business Requirement	156	(1)
Illustration 1	157	(1)
Illustration 2	157	(1)
Working Condition Fringe	158	(1)
De Minimis Fringe	158	(1)
Eating Facilities	158	(1)
Qualified Transportation Fringe	159	(1)
Qualified Moving Expense Reimbrusement	160	(1)
Reimbursed Expenses	161	(1)
Rationale	161	(1)
Moving Expenses	161	(1)
Travel Expenses	161	(1)
Expenses of Interviewing for a Job	162	(1)
Expenses Incurred on Behalf of Another in a Non-Employment Context	162	(1)
Meals and Lodging	163	(1)
Excluded Meals and Lodging	163	(1)
Meaning of Convenience of Employer	163	(1)
Illustration	163	(1)
Meaning of Business Premises	164	(1)
Furnished in Kind	165	(1)
Furnishing of Groceries	165	(1)
Reimbursement for Employee's Meals Taken When Working Late	165	(1)
Payment by Employee	166	(1)
Illustration	166	(1)
Qualified Campus Lodging	166	(1)
Annuities	167	(1)
Percentage of Annuity in Gross Income	167	(1)
Exclusion Ratio	167	(1)
Illustration	168	(1)
Termination of Exclusion Ratio	168	(1)
Deduction Allowable for Unrecovered Investment	169	(1)
Employee Annuity	169	(1)
Private Annuity	170	(1)
Annuity Contract Not Held by a Natural Person	170	(1)
Life Insurance	170	(1)
Lump-Sum Proceeds	170	(1)
Life Insurance Proceeds Payable in Installments	170	(1)
Illustration	171	(1)
Cessation of Installment Payments Before the Entire Amount of the Death Benefit is Distributed	172	(1)
Insurance Proceeds Earning Interest	172	(1)
Transfer for Value	172	(1)
Permissible Assignees	173	(1)
Tax-Free Transfers	173	(1)
Amount Taxable	173	(1)
Illustration 1	173	(1)
Illustration 2	173	(1)
Illustration 3	174	(1)
Miscellaneous Inclusions in Gross Income	174	(1)
Income of Child	174	(1)
Prizes and Awards	174	(1)
Exception: Awards Transferred to Charities	174	(1)
Effect of Transfer	174	(1)
Exception: Employee Achievement Awards	175	(1)
Employee Achievement Award Defined	175	(1)
Length of Service Awards	175	(1)
Safety Achievement Awards	176	(1)
Qualified Plan Award	176	(1)
Dollar Limitations on the Employer's Deduction	176	(1)
Other Than Qualified Plan Awards	176	(1)
Qualified Plan Awards	176	(1)
De Minimis Fringe Benefit	177	(1)
Exceptions: Scholarship	177	(1)
Fair Market Value	177	(1)
Income Received by Error	178	(1)
Illustration	178	(1)
Illegally Obtained Income	178	(1)
Control As a Practical Matter	179	(1)
Interest	179	(1)
Exclusion of Certain Interest	179	(1)
Imputed Interest	179	(1)
Dividend Income	180	(1)
Definition of Dividend	180	(1)
Illustration 1	180	(1)
Illustration 2	180	(1)
Illustration 3	180	(1)
Deduction for Receipt of Dividend By a Corporate Shareholder	181	(1)
Unemployment Compensation	181	(1)
Tax Benefit Rule	181	(1)
General Rule of Inclusion	181	(1)
Illustration 1	182	(1)
Illustration 2	182	(2)
Actual Recovery vs. Fundamental Inconsistency	184	(1)
Inconsistent Use of Expensed Goods	185	(1)
Expensed Cost of Having Purchased Unsold Inventory	186	(1)
Expensed Costs of Maintaining and Cultivating Unsold Inventory	187	(1)
Expensed Research Costs	188	(1)
Expenses Incurred in the Year in Which the Inconsistent Event Occurred	188	(1)
Liquidation of a Corporation	189	(1)
Exclusion Where No Tax Benefit	189	(1)
Illustration	189	(1)
Standard Deduction	190	(1)
Illustration	190	(2)
Gratuitous Recovery	192	(1)
Recovery of Erroneously Deducted Item	193	(2)
Items Excluded from Gross Income	195	(1)
Inherited Property	195	(1)
Income Earned from Inherited Property	196	(1)
Decedent's Unrecognized Income	196	(1)
Basis of Property Acquired from a Decedent	196	(1)
Property Acquired by Decedent As a Gift Within One Year of Death	197	(1)
Income in Respect of a Decedent	198	(1)
Illustration	198	(1)
Penalty for Valuation Overstatement	198	(1)
Generation-Skipping Transfers	199	(1)
Holding Period	199	(1)
Holding Period of Inherited Property	199	(1)
Taxation of Gifts	200	(1)
Examples	200	(1)
Illustration 1	200	(1)
Illustration 2	200	(1)
Definition of a Gift	200	(1)
Mixed Motivations	201	(1)
Term of Art	202	(1)
Factual Issue	202	(1)
Employee Gifts	202	(1)
Illustration 1	203	(1)
Illustration 2	203	(1)
Basis of Gifts	203	(1)
Illustration 1	204	(1)
Illustration 2	204	(1)
Illustration 3	205	(1)
Illustration 4	205	(1)
Bargain Purchases	206	(1)
Illustration 1	207	(1)
Illustration 2	207	(1)
Basis in Bargain Purchase Situation	207	(1)
Illustration	208	(1)
Political Contributions	208	(1)
Accident and Health Benefits	209	(1)
Medical Insurance	209	(1)
Disability Insurance	210	(1)
Workman's Compensation Benefits	210	(1)
Employee Health and Accident Plans	210	(1)
Benefits Attributable to Employer	210	(1)
Reimbursement or Payment of Medical Expenses	211	(1)
Payments Unrelated to Medical Expenses and to Absence from Work	212	(1)
Premiums Paid for Medical Insurance	213	(1)
Improvements Made by a Tenant on Lessor's Realty	213	(1)
Construction of the Improvement: Rent Substitute	213	(1)
Termination of the Lease	213	(1)
Illustration	214	(1)
Qualified Scholarships	214	(1)
Qualified Tuition and Related Expenses	215	(1)
Degree Candidates	215	(1)
Payments for Teaching, Research or Other Services	215	(1)
Athletic and Other Extracurricular Activity Scholarships	216	(1)
Qualified Tuition Reducation	217	(1)
Teaching and Research Assistants	218	(1)
Considered Earned Income	218	(1)
Educational Assistance Program	219	(1)
Tax Policy Justification for Scholarship Exclusion	220	(2)
General Welfare Fund Distributions	222	(1)
Illustration 1	222	(1)
Illustration 2	223	(1)
Social Security Benefits	223	(1)
Definition of ``Social Security Benefit''	223	(1)
Definition of ``Modified Adjusted Gross Income'' and of ``Provisional Income''	223	(1)
Modified Adjusted Gross Income	224	(1)
Provisional Income	224	(1)
Definitions of ``Base Amount'' and of ``Adjusted Base Amount''	224	(1)
Base Amount	224	(1)
Adjusted Base Amount	224	(1)
Determination of Amount Included in Gross Income	225	(1)
Taxpayer's Provisional Income Does Not Exceed His Base Amount	225	(1)
Taxpayer's Provisional Income Exceeds His Base Amount But Does Not Exceed His Adjusted Base Amount	225	(1)
Taxpayer's Provisional Income Exceeds His Adjusted Base Amount	225	(1)
Illustration 1	226	(1)
Illustration 2	226	(1)
Illustration 3	226	(1)
Illustration 4	227	(1)
Benefits From Another Country	227	(1)
Unemployment Benefits	227	(1)
Rental Value of Parsonage	228	(1)
Receipt of Windfalls and Penalties	228	(1)
Adjusted Gross Income and the Standard Deduction	229	(8)
Role of AGI and Standard Deduction in Determining Texable Income	229	(8)
Concept of Adjusted Gross Income	229	(1)
Function of AGI	230	(1)
Miscellaneous Itemized Deductions	230	(1)
Overall Limitation on Itemized Deductions	230	(1)
IRC § 62 Deductions	231	(1)
Standard Deduction	232	(1)
Qualification for the Standard Deduction	232	(1)
Individuals Who Are Barred from Using the Standard Deduction	233	(1)
Dependent's Use of Standard Deduction	233	(1)
Illustration 1	233	(1)
Illustration 2	233	(1)
Illustration 3	233	(1)
Illustration 4	234	(1)
Amount of the Standard Deduction	234	(1)
Basic Standard Deduction	234	(1)
Additional Standard Deduction	234	(1)
Illustration	235	(1)
Illustration	235	(1)
Illustration	236	(1)
Personal and Dependent Exemption Deductions	237	(6)
Exemptions and Deductions in General	237	(6)
Deductible from Adjusted Gross Income (AGI)	237	(1)
Corporations	237	(1)
Types of Exemptions and the Exemption Amount	237	(1)
Personal Exemption	238	(1)
Marital Status of Taxpayer	238	(1)
Legal Separation	238	(1)
Validity of Divorce	239	(1)
Dependent Exemption Deduction	239	(1)
Definition of Dependent	239	(1)
Significance of Qualifying as a Dependent	240	(1)
Old Age and Blindness Exemption	240	(1)
Phase-Out of Exemption Amount	240	(1)
Threshold Amount	241	(1)
Illustration 1	241	(1)
Illustration 2	241	(1)
Illustration 3	242	(1)
Standard Deduction	242	(1)
Business and Nonbusiness Deductions in General	242	(1)
Burden of Proof	242	(1)
Interest Expense	243	(28)
Deduction for Interest Expenses	243	(28)
Interest Incurred by Noncorporate Taxpayer	244	(1)
Material Participation in Trade or Business	244	(1)
Trades and Businesses in Which Taxpayer Does Not Materially Participate and Investments	245	(1)
Passive Activities	245	(1)
Investment Interest	245	(2)
Personal Interest	247	(1)
Exceptions	247	(1)
Interest on Income Tax Deficiency Attributable to Self-Employed Income	247	(2)
Qualified Residence	249	(1)
Qualified Residence Interest	249	(1)
Acquisition Indebtedness	249	(1)
Home Equity Indebtedness	250	(1)
Illustration 1	250	(1)
Illustration 2	251	(1)
Illustration 3	251	(1)
Illustration 4	251	(1)
Loan to Cash Method Taxpayer to Obtain Funds to Pay Interest on Another Loan from the Same Creditor	251	(1)
Illustration	252	(1)
Definition of Interest	252	(1)
Illustration 1: Nonrecourse Debt	252	(1)
Illustration 2: Interest on Another's Debt	253	(1)
Illustration 3: Interest on Tax Deficiency	253	(1)
Illustration 4: Finder's Fee	253	(1)
Guarantor's Payment of Interest	253	(1)
Ascertaining Portion of Carrying Charges for Certain Installment Purchases That Constitute Interest	254	(1)
Inadequate Interest	254	(1)
Deferred Purchase Payments	254	(1)
Exceptions	255	(1)
Loans Bearing Inadequate Interest	255	(1)
Original Issue Discount	256	(1)
Definitions of Terms	256	(1)
Stated Redemption Price at Maturity	257	(1)
Issue Price	257	(1)
Applicable Federal Rate	258	(1)
De Minimis Exception	258	(1)
Illustrations	259	(1)
De Minimis Rule	259	(1)
Issue Price When Debt or Property is Traded on an Established Securities Market	259	(1)
Imputed Issue Price	259	(1)
Accrual and Allocation of OID	260	(1)
Yield to Maturity	260	(1)
Computation of OID	260	(1)
Adjustment to Creditor's Basis	261	(1)
Illustration	261	(1)
Sale or Exchange of Property	261	(1)
Subsequent Holder of Debt Instrument	262	(1)
Characterization of Gain from the Retirement, Sale or Exchange of Debt Instrument	262	(1)
Market Discount	263	(1)
Partial Principal Payments	264	(1)
Stripped Bonds or Coupons	264	(1)
Denial of Deduction	264	(1)
Construction Period Interest	264	(1)
Prepaid Interest	265	(1)
``Points''---Current Deduction	265	(1)
Safe Harbor for the Current Deduction of Points	265	(1)
``Points'' Paid on Refinancing a Home Mortgage	266	(1)
Unamortized Loan Costs Deductible on Taxpayer's Death	267	(1)
Prepayment Penalty	268	(1)
Sham Transactions	268	(1)
Economic Substance Doctrine	268	(3)
State and Local Taxes	271	(4)
Deduction for Payment of Taxes	271	(4)
Deductible Taxes	271	(1)
Definition of ``Tax''	272	(1)
Taxes Not Deductible	273	(1)
Capitalization of Taxes Allocable to the Production of Commercial Realty	273	(1)
Tax Imposed on Another	274	(1)
Apportionment of Real Estate Tax	274	(1)
Illustration: Method of Apportionment	274	(1)
Itemized Deductions	274	(1)
Losses	275	(46)
Deduction of Losses	275	(46)
Denial of Deduction on Public Policy Grounds	275	(2)
Casualty and Theft Losses	277	(2)
Illustration: No Deduction for Loss Incurred on Condemnation of Residence	279	(1)
Rationale	279	(1)
Definition of Casualty	279	(1)
Requirement That a Loss Be Sudden	280	(1)
The Application of the Foreseeability Standard	281	(1)
Weighing Foreseeability	281	(1)
Examples of the Commissioner's Application of the Foreseeability Requirement	282	(1)
The Treatment of Droughts	282	(1)
Damage to or Destruction of Property Contrasted with Losing Property	283	(1)
Timing of Deduction	284	(1)
Itemized or Nonitemized Deduction	284	(1)
Caveat	284	(1)
Judicial Construction	284	(1)
Taxpayer's Negligence	285	(1)
Computation of Amount of Deductible Loss	285	(1)
Alternate Methods	285	(1)
Replacement Cost	286	(1)
No Replacement Is Available	286	(1)
Business Property	286	(1)
Illustration 1: Partial Loss	286	(1)
Illustration 2: Complete Destruction When Basis Exceeds Value	287	(1)
Illustration 3: Complete Destruction When Value Exceeds Basis	287	(1)
Application to Business Property	287	(1)
Limitations on Deduction	288	(1)
Prospect of Reimbursement	288	(1)
Refusal to Seek Reimbursement from Insurer	288	(1)
Effect of Suing for Recovery	289	(1)
Insurance as an Indirect Reimbursement	290	(1)
Subsequent Recovery	290	(1)
Inventory	291	(1)
$100 Floor	291	(1)
Illustration	291	(1)
The Ten Percent of AGI Floor for a Net Casualty Loss	292	(1)
The Definitions	292	(1)
Personal Casualty Gain Limitation	292	(1)
The Ten Percent of AGI Floor	293	(1)
Characterization of Personal Casualty Gains and Losses	293	(1)
Illustration 1	293	(1)
Illustration 2	293	(1)
Illustration 3	294	(1)
Separate Application	294	(1)
Reimbursement Prospects	294	(1)
Illustration: Effect of Reimbursement Prospect on the AGI Floor	295	(1)
Itemized and Nonitemized Deductions	296	(1)
Table of Deductible Losses	296	(1)
Adjustment to Basis	297	(1)
Costs of Repairing Business Property	297	(2)
Costs of Repairing Personally Used Property	299	(1)
Double Deduction	299	(1)
Theft Losses	300	(1)
Illustration: Inconsistent Treatment	300	(1)
Definition of Theft	301	(1)
Illustration: Importance of State Law Definition of Theft	301	(1)
Proof That Casualty or Theft Occurred	302	(1)
Net Operating Loss	302	(1)
Wagering Losses	302	(1)
Residence and Other Non-Income Producing Property	303	(1)
Conversion to Business Property	303	(1)
At Risk Limitation	303	(1)
Limitations on the Deductibility of Losses and Credits Generated by a Passive Activity	304	(1)
Division of Investment and Business Activities into Three Categories	305	(1)
Passive Activity Category	305	(1)
Portfolio Activity	305	(1)
Third Category and Material Participation	305	(1)
Significance of Devision into Categories	306	(1)
Recharacterization of Passive Income	307	(1)
Passive Activity Deductions---Exclusion of Certain Deductions	308	(1)
Passive Activity Gross Income	308	(1)
Carryover of Disallowed Losses and Credits	309	(1)
Disposition of Passive Activity	309	(1)
The Twelve-Month Rule	310	(1)
Substantially Appreciated Property	311	(1)
Transfers at Death or by Gift	311	(1)
Former Passive Activity	312	(1)
Persons Subject to Passive Activity Limitations	312	(1)
Definition of ``Passive Activity''	312	(1)
Rental Activity	313	(1)
Definition of ``Rental Activity''	313	(1)
Exclusions From Rental Activity	313	(1)
Exception for Certain Losses and Credits from Rental Real Estate Activity	314	(1)
Low Income Housing and Rehabilitation Credits	315	(1)
Special Rules for a Taxpayer Who Materially Participates in a Real Property Trade or Business	316	(1)
Earned Income	317	(1)
Interests in Passive Activities Acquired Prior to Adoption of the 1986 TRA	317	(1)
Regulatory Exclusion From Passive Activity Category	317	(1)
Interaction with At Risk Rules	318	(1)
Operation of the PAL	318	(1)
Illustration 1	318	(1)
Illustration 2	318	(1)
Demolition of Structure	319	(2)
Medical Expenses	321	(16)
Medical Expenses	321	(16)
Definition of Medical Care	321	(1)
Personal Expenditure	322	(1)
Cosmetic Surgery	322	(1)
Religious Cure	323	(1)
Divided Purpose	323	(1)
Doctor's Instruction	324	(1)
Illegal Expenditures	325	(1)
Transportation	325	(1)
Limitations on Deduction of Transportation Expenses	325	(1)
Standard Mileage Allowance	326	(1)
Payment with Borrowed Funds	326	(1)
Credit Cards	326	(1)
Insurance Premiums	326	(1)
Travel Expenses	327	(1)
Institutional Care	327	(1)
Primary Purpose Not Medical	328	(1)
Limited Deduction for Lodging Expenses	328	(1)
Illustration: Travel Expenses	328	(1)
Specific Illness	329	(1)
Illustration: Luxury Vacation	330	(1)
Weight Reduction and Stop-Smoking Programs	330	(1)
Abortion	330	(1)
Itemized Deduction	331	(1)
Business Expense	331	(1)
Limitations on Medical Expense Deductions	331	(1)
Amount Deductible	331	(1)
Illustrations of Computation	332	(1)
Illustration 1	332	(1)
Illustration 2	332	(1)
Illustration 3	332	(1)
Reimbursed Expenses	333	(1)
Capital Acquisitions for Medical Care	333	(1)
Illustration 1: Improvement of Taxpayer's Property	334	(1)
Illustration 2: Improvement of Rented Property	334	(1)
Excessive Costs	334	(1)
Illustration 3: Accommodation to Handicap	335	(1)
Specially Prepared Food	335	(2)
Charitable Contributions	337	(32)
Charitable Contributions in General	337	(32)
Definition of Charitable Contribution	337	(1)
Religious Purpose of an Organization	338	(1)
Qualification as a Church	339	(1)
Fixed Fee for Religious Service or Benefit	339	(2)
Contribution or Gift	341	(1)
Substantiation Requirements	342	(1)
Disclosure of Information	343	(1)
Tickets as Compensation	343	(1)
Reward Money	344	(1)
Substantial Benefit to Donor	344	(1)
Contributions to Colleges that Entitle the Taxpayer to Purchase Tickets to Athletic Events	345	(1)
Insubstantial Benefit to Donor	345	(1)
Payment of Expenses of Other Persons Performing Services for a Charity	345	(1)
Gift Subject to Contingency	346	(1)
Administrative Inconsistency	346	(1)
Indirect Payment for Lobbying	347	(1)
Nondeductibility of Depreciation Allowance	347	(1)
Travel Expenses	347	(1)
Borrowed Funds	348	(1)
Declaratory Judgment	348	(1)
Scope of Review	348	(1)
Advance Notice Requirement	349	(1)
Public Policy Exclusions from Exempt Status	349	(1)
Limitations on Amount of Deduction	350	(1)
Gifts of Appreciated Property	350	(1)
Illustration 1: Property with Zero Basis	350	(1)
Illustration 2: Property with Dollar Basis	351	(1)
Illustration 3: Appreciation is Partially Capital Gain and Partially Ordinary Income	351	(1)
Illustration 4: Installment Obligation	351	(1)
Percentage Limitation on an Individual's Charitable Deduction	351	(1)
Definition of Contribution Base	352	(1)
Maximum Limitation	352	(1)
Limitation on Other Charitable Gifts	352	(1)
Illustration 1: Fifty Percent Limitation	353	(1)
Illustration 2: Thirty Percent Limitation	353	(1)
Maximum Limitation on Deductions for a Corporation's Charitable Gifts	354	(1)
Carryover of Unused Deduction	354	(1)
Illustration 1: Computation of Amount of Carryover	354	(1)
Illustration 2: Limitation on Use of Carryover	354	(1)
Illustration 3: Effect of Carryover Deduction on Gifts to ``B'' Charities	355	(1)
Illustration 4: Use of Carryover Deduction	355	(1)
Gift of Capital Gain Property	355	(1)
Tangible Personal Property	355	(1)
Illustration 1: Limitation of Amount of Gift	356	(1)
Illustration 2: Donee's Use of Property in Conduct of Charitable Function	356	(1)
Gifts to Certain Private Foundations	356	(1)
Other Gifts of Capital Gain Property	357	(1)
Thirty Percent Limitation	357	(1)
Carryover of Excess Contributions	357	(1)
Illustration 1: Operation of Thirty Percent Limitation and Carryover	357	(1)
Illustration 2: Effect that Gift of Capital Gain Property to an ``A'' Charity Has on Deductibility of a Cash Gift to a ``B'' Charity	358	(1)
Gifts of Capital Gain Property to ``B'' Charities	358	(1)
Election to Reduce Amount of Gift	359	(1)
Illustration 1: Acceleration of Timing of Deduction	360	(1)
Illustration 2: Effect on Gifts to ``B'' Charities	360	(1)
Bargain Sales	361	(1)
Illustration: Allocation of Basis	361	(1)
Gifts of Partial Interest in Property	362	(1)
Gifts of an Income Interest in a Trust	362	(1)
Gifts of Remainder Interests in a Trust	363	(1)
Charitable Remainder Annuity Trust	363	(1)
Charitable Remainder Unitrust	363	(1)
Pooled Income Fund	364	(1)
Exceptions for Gifts of Complete Interests	364	(1)
Contributions Not Made in Trust of Partial Interest in Property	364	(1)
Exceptions	364	(1)
Illustration: Uncompensated Lease of Property	365	(1)
Contribution of a Future Interest in Tangible Personalty	365	(1)
Illustration 1: Retention of Possession by Donor	365	(1)
Illustration 2: Donation of Possessory Interest to a Related Party	365	(1)
Illustration 3: Donation of Possessory Interest to a Nonrelated Party	366	(1)
Illustration 4: Restrictions on Donee's Use of Property	366	(1)
Contribution of Services	366	(1)
Donation of Blood to a Charity	366	(1)
Expenses Incurred in Providing Services	367	(1)
Assignment of Income	367	(1)
Itemized Deduction	367	(1)
Penalty for Overvaluation	367	(1)
Information Return	368	(1)
Business and Nonbusiness Expenses	369	(112)
Business and Nonbusiness Expenses	369	(112)
Ordinary Expenses: General	369	(1)
Trade or Business	370	(1)
Facts and Circumstances Test	371	(1)
Stock Investment Activity	371	(1)
Time When Business Commences	372	(1)
Interruption of Business	372	(1)
Activity Not Engaged in for Profit	372	(1)
Determining ``Profit-Making Activity''	373	(1)
Presumption	373	(1)
Taxable Income	374	(1)
Illustration 1: Hobby Expenses	374	(1)
Illustration 2: Non-Profit Oriented Deductions	375	(1)
Rental of a Dwelling Unit	375	(1)
Allocation	376	(1)
Limitation on Deductions	376	(1)
Allocation of Non-Profit Oriented Expenses	377	(1)
Exception for Principal Residence	378	(1)
Illustration	378	(2)
Rental for a Brief Period	380	(1)
Coordination with IRC § 183	380	(1)
Temporary Rental of Residence	381	(1)
Nonitemized Deductions	381	(1)
Nonbusiness Expenses	381	(1)
Compared with ``Trade or Business'' Expense	382	(1)
Illustration 1: Expenses of Seeking Alimony	382	(1)
Illustration 2: Expenses Incurred in Seeking Damages	382	(1)
Illustration 3: Expenses Incurred in Management of Income-Producing Property	383
Expenses Incurred in Reducing Taxpayer's Obligation to Pay Deductible Expenses	382	(1)
Tax-Related Expenses	383	(1)
Personal Expenses	384	(1)
Mixed Purposes	384	(1)
Deductibility Determined from the Source of the Obligation or from the Immediate Objective of the Expense	384	(1)
Illustration: Defense of Divorce Suit	384	(1)
Immediate Objective Controls Characterization	385	(1)
The Origin Test	385	(1)
Proper Use of the Origin Test	386	(1)
Business Deductions	387	(1)
Nonbusiness Deductions	387	(1)
Summary	388	(1)
Capital Expenditures	388	(1)
Illustration 1: Expense Arising from Acquisition of a Capital Asset	389	(1)
Illustration 2: Expense Arising from Acquisition of a Capital Asset	389	(1)
Illustration 3: Mixed Business and Personal Objectives	390	(1)
Illustration 4: Distinguishing Purposes of Closely Held Corporation from Purposes of Its Shareholder	390	(1)
Illustration 5: Difficulty of Identifying Origin	391	(1)
Illustration 6: Multiple Disputes	392	(1)
Misuse of the Origin Test	392	(1)
Capital Expenditures in Defending a Divorce Action	393	(1)
Tax Advice Incident to a Divorce	393	(1)
Conversion of Residence	394	(2)
Statutory Restrictions	396	(1)
Percent Limitation on Deduction of Entertainment and Meal Expenses	396	(1)
Illustration	396	(1)
Limitation on Deduction for Executive Compensation	397	(1)
Capital Expenditures	398	(3)
Small Cost Exception	401	(1)
Allocation to Year of Use	401	(1)
Illustration 1: Purchase of Tangible Property	401	(1)
Illustration 2: Purchase of Intangible Property	401	(1)
Illustration 3: Purchase of Property with an Inexhaustible Life	402	(1)
Illustration 4: Use of Depreciable Property in Constructing an Asset	402	(1)
Wages	402	(1)
Prepaid Expenses and the Cost of Currently Consumable Assets	402	(1)
Determining the Property of Expensing Prepayments or the Cost of Consumable Assets	403	(1)
Capital Expenditure versus Repairs	404	(1)
Caveat	404	(1)
Major Renovations	404	(1)
The Indopco Decision Has No Effect on the Deductibility of Repairs	405	(1)
Repair of Damage Caused by a Casualty	405	(1)
Environmental Clean-Up Costs	405	(1)
Developing or Purchasing Software	406	(1)
Purchase or Sale of an Asset	407	(1)
Expanding a Business	407	(2)
Congressional Action	409	(1)
Date on Which Active Trade or Business Begins	410	(1)
Current Deduction of Start-Up Expenditures	411	(1)
Abandoned Project	411	(1)
Investigatory Search	412	(1)
Expenses of Producing Property---the Uniform Capitalization Rule	413	(1)
Defense of Title	413	(1)
Illustration: Dispute Over Title	413	(1)
Protection of Goodwill	413	(1)
Expense of Seeking or Obtaining Employment	414	(1)
Taxpayer Already in the Business	414	(1)
The Expense of Obtaining or Retaining a Political Office	414	(1)
The Commissioner's View	415	(1)
Administrative Feasibility	416	(1)
Reimbursed Expenses for Interviewing for a Job	416	(1)
Deductibility of Capital Expenditures	417	(1)
Depreciation and Amortization	417	(1)
Illustration 1: Allocation of Cost Between Depreciable and Nondepreciable Items	417	(1)
Illustration 2: Depreciation of Intangible Asset	417	(1)
Uniforms	418	(1)
Itemized Deduction	418	(1)
Test for Determining ``Adaptable to General Use''	418	(1)
Books, Films, Plays, Photographs, Sound Recordings, Fine Art Products, and Similar Properties	419	(1)
Ordinary and Necessary	420	(1)
Necessary Defined	420	(1)
Failure to Seek Reimbursement	420	(1)
Ordinary Defined	421	(1)
Current View	422	(1)
Roles of the Term ``Ordinary''	422	(1)
Office in Home	423	(1)
Exceptions	423	(1)
Principal Place of Business	424	(3)
Illustration 1. Others Perform Administrative Tasks Too	427	(1)
Illustration 2. Taxpayer Carries Out Minor Administrative Duties At Another Fixed Location	427	(1)
Place of Business Used by Patients, Clients, or Customers in Meeting or Dealing with the Taxpayer	428	(1)
Employee's Home Office	428	(1)
Storage Use	429	(1)
Limitation on Deductions	429	(1)
Unreasonably Large Expenses	430	(1)
Bribes, Illegal Kickbacks, and Other Illegal Payments	430	(1)
Payments to Government Officials	430	(1)
Other Bribes and Kickbacks	430	(1)
Illegal Payments	430	(1)
No Penalty	431	(1)
Applications of Illegal Payment Rule	431	(1)
Miscellaneous	431	(1)
Lobbying Expenses	431	(1)
Fines and Penalties	431	(1)
Illustration: Characterization of a Fine	432	(1)
Deductible Civil Penalty	432	(1)
Purpose of Penalty	433	(1)
Restitution Payments	433	(1)
Treble Damages Under the Antitrust Laws	434	(1)
Contributions to Charitable Organizations	434	(1)
Credit for Child Care and Household Expenses	434	(1)
Qualifying Individuals	435	(1)
Employment-Related Expenses	435	(1)
Limitations on Credit	436	(1)
Dollar Limit	436	(1)
Earned Income Limitation	436	(1)
Maximum Income	436	(1)
Payments to Dependents	437	(1)
Married Taxpayers	437	(1)
Travel Expenses	437	(1)
General	437	(1)
Conditions to be Satisfied	438	(1)
``Transportation Costs'' Distinguished	438	(1)
Deduction of the Cost of Meals That Are Not Incurred as Travel Expenses	439	(1)
Travel Expense of Individual Accompanying Taxpayer	439	(1)
Away From Home: General	440	(1)
Military Assignment	440	(1)
Stidger and Non-Military Taxpayers	441	(1)
Overnight or ``Sleep or Rest'' Rules	441	(1)
Transportation Between Residence and Work Location (Commuting Expense)	441	(2)
Major and Minor Post	443	(1)
Illustration	444	(1)
Travel Among Multiple Jobs	444	(1)
Office in Residence as Minor Post	445	(1)
Boundaries of a Taxpayer's ``Home''	445	(1)
No Principal Place of Business but a Regular Place of Abode	445	(1)
No Principal Place of Business and No Permanent Residence	446	(1)
Temporary Jobs	447	(1)
Summer Employment of a Student	447	(1)
Exigencies of the Business	448	(1)
Commuting Expenses	448	(1)
Transportation of Tools	448	(1)
Requisities for Deduction	448	(1)
The Fausner Decision	448	(1)
The Supreme Court's Decision	449	(1)
The Commissioner's Revised Position	449	(1)
Litigation Position of the Commissioner	450	(1)
Future Treatment	450	(1)
Temporary Job Exception	451	(1)
Meaning of Temporary	451	(2)
Applicability to the General Provisions of IRC § 162(a)	453	(1)
Overnight Rule	453	(1)
Unreasonableness of Application	454	(1)
Policy Considerations for Allowing a Deduction for Extraordinary Expenses for Commuting to a Temporary Job	455	(1)
Deductible if Necessary to Trade or Business	455	(1)
Extraordinary Away from Home Expenses	456	(1)
No Regular Place of Business	456	(1)
Travel to Nearest Habitable Community	456	(1)
Illustration	457	(1)
Justification for the Deduction	457	(1)
Commuting Combined With Tour of Duty	457	(1)
Moving Expenses	458	(1)
Deductible Items	458	(1)
Deductions For Relocation Expenses	459	(1)
Nonitemized Deduction	459	(1)
Reimbursement by Employer	459	(1)
Members of the Armed Forces	459	(1)
Substantiation and Records	459	(1)
Education Expenses	460	(1)
Deductible Expenses	460	(1)
Nondeductible Education Expenses	460	(1)
Illustration 1: Continuing Professional Education Courses	460	(1)
Illustration 2: Law School Course	460	(1)
Illustration 3: University Courses	461	(1)
Bar Review Courses	461	(1)
Common Sense	462	(1)
Teachers	462	(1)
Previously Engaged in a Trade or Business	463	(1)
Travel Expenses	463	(1)
Frustration of Public Policy	464	(1)
Illegal Under State Law	464	(1)
Reconciliation	464	(1)
Expenses to Defend Criminal Action	465	(1)
Illustration 1: Defending Tax Fraud Charges	465	(1)
Illustration 2: Resisting Forfeiture of an Asset	465	(1)
Theft Loss from Illegal Transaction	465	(1)
Loss Deductions That Contravene Public Policy	466	(1)
Bad Debts	467	(1)
Nature of Deduction	467	(1)
Business versus Nonbusiness Debts	467	(1)
Definition	467	(1)
Debt of Corporation to Its Shareholder	467	(1)
Primary Purpose	468	(1)
Extension of Generes	468	(1)
Guarantee of a Corporate Debt	469	(1)
Guarantee of a Noncorporate Debt	469	(1)
Guarantee Creating Deductible Bad Debt	469	(1)
Amount Deductible	469	(1)
Disallowance of Bad Debt Reserve	469	(1)
Collection of Previously Deducted Debt	470	(1)
Illustration: Operation of Tax Benefit Rule	470	(1)
Worthless Securities	471	(1)
At Risk Limitation	472	(1)
Separately Identified Activities	472	(1)
Safe Harbors	472	(1)
Partnerships and S Corporations	472	(1)
Limitation on Deductions	473	(1)
Carryover of Nondeductible Losses	473	(1)
Gain Recognized on the Disposition of an Activity	474	(1)
Real Property	474	(1)
Liberal Definition of ``At Risk''	474	(1)
Qualified Nonrecourse Financing	474	(1)
Qualified Person	475	(1)
Related Person	475	(1)
Basis	476	(1)
Computation of At Risk Amount	476	(1)
Additions to the At Risk Amount	476	(1)
Reduction of At Risk Amount	477	(1)
Recapture of Loss Deduction	478	(1)
Computation of Amount of Recapture Section 465(d) Losses	478	(1)
Illustration: Operation of Recapture Rule	478	(1)
Interaction with Passive Activity Losses and Credits	479	(1)
Donative Transfer of Entire Interest in Activity With Suspended Section 465(d) Loss	479	(1)
Donative Transfer of Entire Interest in Activity In Which Transferor Has a Positive Amount at Risk	479	(1)
Transfer of an Interest in an Activity by Reason of Death	480	(1)
Depreciation and Amortization	481	(18)
Cost Recovery	481	(18)
General	481	(1)
Meaning of Depreciation	482	(1)
Accelerated Cost Recovery System (ACRS)	483	(1)
Modified Accelerated Cost Recovery System (MACRS)	483	(1)
Continuing Significance of IRC § 167	483	(1)
Sufficiency of Interest	484	(1)
Depreciation as a Capital Expenditure	484	(1)
Starting Date for Depreciation	484	(1)
Depreciable Property	484	(1)
Tangible Property	484	(1)
Intangible Property	485	(1)
Goodwill and Similar Intangible Properties	485	(3)
Inventory or Stock in Trade	488	(1)
Importance of Distinction Between Depreciation and Amortization	488	(1)
Shortened Amortization Period	488	(1)
Elements of a Depreciation Deduction	488	(1)
Useful Life	488	(1)
No Exhaustible Life	489	(1)
General Asset Accounts	489	(1)
Conclusive Guidelines	489	(1)
Depreciation or Amortization of a Term Interest	490	(1)
Salvage Value	490	(1)
Methods of Depreciation	490	(1)
Units of Production Method	491	(1)
Illustration	491	(1)
Straight-Line Method	491	(1)
Illustration	491	(1)
Declining Balance Method	491	(1)
Salvage Value Disregarded	492	(1)
Minimum Useful Life	492	(1)
New Property	492	(1)
Illustration	492	(1)
Rate of Depreciation	492	(1)
Illustration	493	(1)
Sum of the Years-Digits Method	493	(1)
Illustration	493	(1)
Shorthand Technique	494	(1)
Remaining Life	494	(1)
Illustration	494	(1)
Required Useful Life	495	(1)
New Property	495	(1)
Accelerated Methods	495	(1)
Other Methods of Depreciation	495	(1)
Income Forecast Method	495	(1)
Land	496	(1)
Illustration	496	(1)
Depreciation of Improved Real Estate	496	(1)
Adjustment to Basis	497	(1)
Recapture of Depreciation	497	(1)
Depreciation in the Year of Sale	497	(2)
Modified Accelerated Cost Recovery System (MACRS)	499	(22)
Cost Recovery	499	(22)
General	499	(1)
Expensing of the Cost of Certain Business Assets	499	(3)
Estates and Trusts	502	(1)
Illustration	502	(1)
MACRS (The Modified Accelerated Cost Recovery System)	503	(1)
MACRS Property	503	(1)
Determinable Useful Life	504	(1)
Adjusted Basis	505	(1)
Salvage Value	505	(1)
Works of Art	505	(1)
Determination of the Amount of Depreciation	506	(1)
Classification of Property	506	(1)
Use of ADR Class Lives	506	(1)
Classification by Class Life	507	(1)
Classification by Specific Provision in IRC § 168	508	(1)
Monitoring of MACRS Categories	509	(1)
Buildings	509	(1)
Change in Use	509	(1)
Short Taxable Year	509	(1)
Applicable Method of Depreciation	509	(1)
Method for Depreciating Buildings	510	(1)
Method for Depreciating 15-Year and 20-Year Property	510	(1)
Method for Depreciating Other Properties	510	(1)
Election to Use the Straight-Line or 150 Percent Declining Balance Method	510	(1)
Illustration	511	(1)
Straight-Line under the Alternative System	511	(1)
Applicable Recovery Period	512	(1)
Alternative System	512	(1)
Applicable Convention	512	(1)
Mid-Month Convention	513	(1)
Half-Year Convention	513	(1)
Mid-Quarter Convention	513	(1)
Illustrations	514	(1)
Illustration 1	514	(1)
Illustration 2	514	(1)
Illustration 3	515	(1)
Illustration 4	516	(1)
Alternative Depreciation System	516	(1)
Properties for Which the Alternative System is Required	517	(1)
Election	517	(1)
Corporations' Earnings and Profits	517	(1)
Minimum Tax	518	(1)
Optional Tables	518	(1)
Luxury Automobiles	518	(1)
Disposition of MACRS Property in a Nonrecognition Transaction	518	(3)
Miscellaneous Credits and Deductions	521	(16)
Miscellaneous Credits and Deductions	521	(16)
Credits and Deductions in General	521	(1)
Examples of Tax Credits and Deductions	521	(1)
Repeal of the Regular Investment Tax Credit	521	(1)
Earned Income Credit	522	(1)
Determination of Credit	522	(1)
Earned Income Amount	523	(1)
Earned Income	524	(1)
Eligible Individual	524	(1)
Qualifying Child	524	(1)
Credit Percentage	525	(1)
Phaseout of Credit	525	(1)
Illustration	526	(1)
Refundable Credit	527	(1)
Married Individual	527	(1)
Alternative Minimum tax	527	(1)
Tables Provided by the Service	527	(1)
Advance Receipt of A Portion of an Individual's Credit	527	(1)
Return of Income Held Under a Claim of Right	527	(1)
Illustration	528	(1)
Tax Bracket Differential	528	(1)
Statutory Relief	528	(1)
Limitations	529	(1)
Unrestricted Right	529	(1)
Embezzled Funds and Other Funds Obtained by Intentional Wrongdoing	530	(1)
Obligation to Repay	530	(1)
Validity	531	(1)
Mathematical or Clerical Error	531	(1)
Net Operating Loss	532	(1)
Prompt Refund	532	(1)
Significance of IRC § 1341	532	(1)
Other Credits	532	(1)
Net Operating Loss Carryover and Carryback	532	(1)
Computation	533	(1)
Types of Losses Deductible	533	(1)
Chronology of Carryover	533	(1)
Depletion	533	(1)
Depletable Property	533	(1)
Economic Interest	534	(1)
Methods of Depletion	534	(1)
Cost Depletion	534	(1)
Illustration 1	534	(1)
Illustration 2	534	(1)
Percentage Depletion	535	(1)
Percentage Based on Type of Deposit	535	(1)
Cumulative Depletion Deduction Allowed in Excess of Taxpayer's Basis	535	(1)
Alimony	535	(1)
Income in Respect of a Decedent (IRD)	536	(1)
Deductions in Respect of a Decedent	536	(1)
Joint Returns, Head of Household, and Surviving Spouse	537	(8)
Joint Returns, Head of Household, and Surviving Spouse	537	(8)
Joint Return	537	(1)
Qualifications	537	(1)
Election for Nonresident Alien	537	(1)
Marital Status	537	(1)
Change of Election	538	(1)
Joint Return with a Deceased Spouse	538	(1)
Tax Computation for Joint Returns	538	(1)
Marriage Bonus and Marriage Penalty	538	(1)
Combining Deductions	539	(1)
Increase of Limitations on Deductions	539	(1)
Qualification for Tax Advantage	539	(1)
Disadvantages of Joint Returns	540	(1)
Joint and Several Liability	540	(1)
Relief from Joint Liability	540	(1)
Innocent Spouse Election	540	(1)
Separate Liability Election	541	(1)
Loss of Dependency Deduction	542	(1)
Medical Deduction	542	(1)
Marriage Penalty	542	(1)
Surviving Spouse	542	(1)
Definition	542	(1)
Limited to Two Years	543	(1)
Head of Household	543	(1)
Definition	543	(2)
Alternative Minimum Tax	545	(16)
Alternative Minimum Tax	545	(16)
Establishment of the Minimum Tax	545	(1)
Alternative versus Add-On Minimum Tax	545	(1)
Exclusivity of the Alternative Minimum Tax	545	(1)
Alternative Minimum Taxable Income (AMTI)	546	(1)
``Adjustments'' and ``Tax Preferences''	546	(1)
Determination of Alternative Minimum Tax (AMT)	546	(1)
Noncorporate Taxpayers---Taxable Excess, Tentative Minimum Tax, and AMT	547	(1)
Corporate Taxpayers---Tentative Minimum Tax and AMT	547	(1)
Minimum Tax Income Alterations (MTIA)	548	(1)
Tax Preference Items (TPI)	548	(1)
Percentage Depletion	548	(1)
Intangible Drilling Costs	548	(1)
Accelerated Depreciation or Amortization of Certain Properties Placed in Service Prior to 1987	548	(1)
Tax-Exempt Interest	549	(1)
Small Business Stock	549	(1)
AMTI Adjustments	549	(1)
AMTI Adjustments Applicable to All Taxpayers	549	(1)
Depreciation	549	(1)
Tangible Property Placed in Service after 1986 and before 1999	550	(1)
Tangible Property Placed in Service after 1998	551	(1)
No Adjustments for Deductions Allowed as Expenses under IRC § 179	551	(1)
Basis Adjustment	551	(1)
Use of the Completed Contract Method	552	(1)
Mining Exploration and Development Costs	552	(1)
Certified Pollution Control Facilities	552	(1)
Alternative Tax Net Operating Loss Deduction (ATNOL)	552	(1)
Alcohol Fuel Credit	552	(1)
AMTI Adjustments Applicable to Noncorporate Taxpayers and to Certain Corporations	553	(1)
Denial of Tax Shelter Farm Losses	553	(1)
Corporate and Noncorporate Taxpayers	553	(1)
Disallowance of Passive Activity Losses (PAL)	553	(1)
Corporate and Noncorporate Taxpayers	553	(1)
AMTI Adjustments Applicable Only to Individuals	553	(1)
Itemized Deductions	553	(1)
Medical Expenses	554	(1)
Taxes	554	(1)
Interest	554	(1)
Miscellaneous Itemized Deductions	554	(1)
Standard Deduction and Personal Exemption	554	(1)
Other Itemized Deductions	554	(1)
Circulation, Research, and Experimental Expenditures	555	(1)
Noncorporate Taxpayers	555	(1)
Incentive Stock Options	555	(1)
AMTI Adjustments Applicable Only to Corporations	555	(1)
AMTI Adjustment for Book Income	555	(1)
Adjusted Net Book Income	555	(1)
AMTI Adjustment Based on Adjusted Current Earnings	556	(1)
Negative Adjustments	556	(1)
Adjusted Current Earnings (ACE)	556	(1)
Corporate Taxpayers	557	(1)
Computation of Alternative Minimum Tax	557	(1)
Alternative Minimum Taxable Income (AMTI)	557	(1)
Alternative Minimum Tax Rates	558	(1)
Noncorporate Taxpayers	558	(1)
Corporate Taxpayers	558	(1)
Exemption Amounts	558	(1)
Noncorporate Taxpayers	558	(1)
Married Individual Filing Jointly and Surviving Spouses	558	(1)
Single Individual Other Than a Surviving Spouse	558	(1)
Married Individual Filing Separately, Estate, or Trusts	558	(1)
Corporate Taxpayers	558	(1)
Adjusted Basis of Certain Properties for Adjusted Minimum Tax Purposes	559	(1)
Credits	559	(1)
Alternative Minimum Tax Foreign Tax Credit (AMTFTC)	559	(1)
Regular Tax	559	(1)
Minimum Tax Credit	559	(1)
Special Election for Prolonged Writeoffs of Certain Expenditures	560	(1)
Attribution of TPI	560	(1)
Tax Benefit Requirement	560	(1)
Realization of Gain or Loss on the Disposition of Property	561	(26)
Realization of Gain or Loss on the Disposition of Property	561	(26)
Recovery of Cost	561	(1)
Gain Attributable to Inflation	562	(1)
Cost Reflecting Unlawful Expenditure	563	(1)
Part Gift, Part Sale	563	(1)
Illustration	564	(1)
Disguised Sales	564	(1)
Sale of a Term Interest	564	(1)
Disregard of Basis	564	(1)
Definition of ``Term Interest''	565	(1)
Exception	565	(1)
Illustration 1	565	(1)
Illustration 2	565	(1)
Amount Realized	566	(1)
Encumbered Property	566	(1)
Nonrecourse Debt in Excess of Value	566	(1)
Recourse Debt in Excess of Value---Transfer to Creditor Who Cancels Debt	567	(1)
Illustration	567	(1)
Rationale for Different Treatment of Recourse and Nonrecourse Debts	568	(1)
Recourse Debt in Excess of Value of Property---Transfer to Creditor Who Does Not Cancel Debt	569	(1)
Recourse Debt in Excess of Value of Property---Transfer to Third Party Who Assumes the Debt	569	(1)
Transfer Subject to a Liability That Was Incurred on Taxpayer's Acquisition of the Transferred Property	570	(1)
Illustration 1	570	(1)
Illustration 2	571	(1)
Illustration 3	571	(1)
Insolvent Transferor	572	(1)
Gift of Property Subject to Nonrecourse Debt	572	(1)
Transfer in Trust for Spouse or Former Spouse	573	(1)
Illustration	573	(1)
Expenses of Sale	573	(1)
Selling Commissions	573	(1)
Transfer Subject to Gift Tax (Net Gifts)	573	(1)
Illustration	574	(1)
Computation of Donor's Gain	574	(1)
Donee's Basis	574	(1)
Illustration	575	(1)
Receipt of Property with Unascertainable Value	575	(1)
Installment Sale Treatment	576	(1)
Illustration	576	(1)
Extraordinary Circumstances	577	(1)
Material Differences in Exchanged Properties	577	(1)
The Treatment of the Modification of A Debt Instrument as an Exchange of Properties	578	(1)
Significant Modification	578	(3)
Installment Instruments	581	(1)
Basis	581	(1)
General	581	(1)
Encumbered Property	581	(1)
Illustration 1	582	(1)
Illustration 2	582	(1)
Allocation of Basis	582	(1)
General	582	(1)
Illustration	582	(1)
Sale of Stocks	583	(1)
No Means of Allocations	583	(1)
Illustration	583	(1)
Settlement of Obligation	584	(1)
Illustration 1	584	(1)
Illustration 2	584	(1)
Marital Transfers	584	(1)
Gifts of Appreciated Property to a Political Organization	585	(1)
Item by Item Determination	585	(2)
Recognition of Gain or Loss on the Disposition of Property	587	(42)
Recognition of Gain or Loss on the Disposition of Property	587	(42)
General	587	(1)
Illustration	587	(1)
Nonrecognition of Gain or Loss on Certain Exchanges of Property	587	(1)
General	587	(1)
Illustration	588	(1)
Exchanges of Like-Kind Property	588	(1)
Like Kind	588	(2)
Personal Properties	590	(1)
Depreciable Tangible Personal Property	590	(2)
Intangible Personal Property	592	(1)
Illustration 1. Copyrights on Novels	592	(1)
Illustration 2. Copyrights on Novels and Songs	592	(1)
Goodwill or Going Concern Value	592	(1)
Nondepreciable Tangible Personal Property	592	(1)
Mandatory Nonrecognition	593	(1)
Property Acquired for Purpose of Exchanging It for Other Property	593	(1)
Multiple Party Exchanges	593	(1)
Illustration	594	(1)
Deferred Exchanges---The Starker Principle	594	(1)
Starker I	595	(1)
Starker II and Starker III	595	(1)
Deferred Exchanges---Time Limitations	596	(1)
Acquisition Directly from Third Party	597	(1)
Momentary Ownership of Acquired Property	597	(1)
Momentary Ownership of Property Prior to the Exchange	598	(1)
Exchanges With A Related Person	599	(1)
Boot	600	(1)
Effect of Boot on Recognition of Gain	600	(1)
Illustration	600	(1)
Liabilities as Boot	601	(1)
Illustration 1	601	(1)
Illustration 2	602	(1)
Effect of Boot on Recognition of Loss	603	(1)
Basis of Property Received in a Section 1031 Exchange	603	(1)
Illustration 1	604	(1)
Illustration 2	604	(1)
Overview	605	(1)
Multiple Properties	605	(9)
Illustration	614	(4)
Involuntary Conversions	618	(1)
Elective	618	(1)
Requirements	618	(1)
Statutory Period	619	(1)
Election	619	(1)
Similar or Related in Service or Use	619	(1)
Investment in a Partnership	619	(1)
Residence	620	(1)
Basis	620	(1)
Illustration	620	(1)
Other Nonrecognition Provisions	620	(1)
Sale of Residence	620	(3)
Interface of IRC § 121 and 1033	623	(1)
Basis	623	(1)
Other Sales or Exchanges	623	(1)
Disallowance of Loss Deduction for Certain Sales or Exchanges	624	(1)
Sales Between Related Parties	624	(1)
Transferee's Gain on Subsequent Sale	624	(1)
Illustrations	624	(1)
Illustration 1	624	(1)
Illustration 2	625	(1)
Illustration 3	625	(1)
Sales Between Two Related Trusts	625	(1)
Denial of Certain Deductions	625	(1)
Wash Sales	625	(1)
Forbidden Period	626	(1)
Basis of Purchased Stocks or Securities	626	(1)
Matching Stocks or Securities Sold with Those Acquired	626	(1)
Illustrations	626	(1)
Illustration 1	626	(1)
Illustration 2	627	(1)
Illustration 3	627	(2)
Capital Gains and Losses	629	(40)
Capital Gains and Losses	629	(40)
General	629	(1)
Tax Treatment of Capital Gains and Losses	629	(1)
Groupings of Long- and Short-Term Gains and Losses	629	(1)
Netting of Gains and Losses	630	(1)
Net Capital Gain	630	(1)
Significance of Net Capital Gain Concept	630	(1)
Application of the Maximum Tax Rates to Net Capital Gains of Noncorporate Taxpayers	631	(1)
Treatment of Gains	632	(4)
Allocation of Capital Losses	636	(1)
Illustration 1	637	(1)
Illustration 2	638	(2)
Additional Tax Rate	640	(1)
Significance of Groupings	640	(1)
Limitation on Capital Loss Deductions: General	641	(1)
Deductible from Capital Gains	641	(1)
Illustration 1	641	(1)
Illustration 2	641	(1)
Deductible from Ordinary Income	642	(1)
Illustration	642	(1)
Carryover of Capital Loss: Corporations	642	(1)
Limitations	643	(1)
Loss Not Absorbed by Carryback	643	(1)
Carryover of Capital Loss: Noncorporate Taxpayers	643	(1)
Contrasted with Corporate Taxpayers	643	(1)
Priority of Allocation	644	(1)
Unclaimed Carryover Loss Deduction	644	(1)
Definition of ``Capital Asset''	644	(1)
Statutory Definition	644	(1)
Meaning of the Term ``Property''	645	(1)
Compensatory Payments	645	(1)
Relinquishment of Personal Rights	645	(1)
Validity of Narrow Construction of the Term ``Property''	645	(1)
Statutory Exclusions	646	(1)
Property Held Primarily for Sale to Customers in the Ordinary Course of the Taxpayer's Trade or Business	646	(1)
Taxpayer's Purpose	646	(1)
Customers	646	(1)
Ordinary Course of Trade or Business	647	(1)
Illustration 1	647	(1)
Illustration 2	647	(1)
Definition of ``Primarily''	647	(1)
Dual Purpose	648	(1)
Illustration	648	(1)
Change of Purpose	649	(1)
Illustration 1	649	(1)
Illustration 2	650	(1)
Undecided Purpose	651	(1)
Treatment in the Courts	651	(1)
Appellate Review	651	(1)
Real Property Used in a Trade or Business and Depreciable Property Used in a Trade or Business	652	(1)
Illustration 1	652	(1)
Illustration 2	652	(1)
Illustration 3. Goodwill	653	(1)
Copyrights, Literary or Musical Compositions, and Similar Properties	653	(1)
Patents	653	(1)
Accounts Receivable	654	(1)
Real Property Subdivided for Sale	654	(2)
Judicial Exceptions to Capital Gains Treatment	656	(1)
Anticipation of Ordinary Income	656	(1)
Corn Products Doctrine	656	(1)
Rationale	656	(1)
Repudiation of the Doctrine	657	(1)
Corporate Stock	657	(2)
Sale of Right to Personal Services or Contract Rights	659	(1)
Personal Services	659	(1)
Contract Rights	659	(1)
Illustration	659	(1)
Characterizing Payment	660	(1)
Illustration	660	(1)
Leasehold Interest	660	(1)
Correlation with Prior Transactions	661	(1)
Illustration 1	661	(1)
Illustration 2	661	(1)
Insider Stock Profits	661	(1)
Application	662	(1)
Sale or Exchange	662	(1)
Involuntary Conversion	663	(1)
Abandonment	663	(1)
Bootstrap Sales	663	(1)
Cancellation of Lease or Distributor's Agreement	663	(1)
Statutory Characterization of Certain Transactions	664	(1)
Bad Debt Deduction	664	(1)
Worthless Security	664	(1)
Holding Period	664	(1)
Tacking	664	(1)
Illustration	664	(1)
Tacking in Tax-Free Exchanges	665	(1)
Illustration 1	665	(1)
Illustration 2	665	(1)
Gain from Qualified Small Business Stock	665	(1)
Exclusion from Gross Income	665	(1)
Limitation on Amount of Exclusion	666	(1)
Eligible Gain	666	(1)
Treatment of Non-Excluded Eligible Gain	666	(1)
Minimum Tax	666	(1)
Section 1202 Gain	666	(1)
Qualified Small Business	667	(1)
Qualified Small Business Stock	667	(2)
Quasi-Capital Assets and Recapture of Depreciation	669	(22)
Quasi-Capital Assets and Recapture of Depreciation	669	(22)
Background: Property Used in Trade or Business	669	(1)
Congressional Relief	669	(1)
IRC § 1231	670	(1)
Transactions Included in IRC § 1231	670	(1)
Involuntary Conversion Qualified	671	(1)
Illustration 1	671	(1)
Illustration 2	671	(1)
Definition of ``Property Used in the Trade or Business''	671	(1)
Property Excluded	672	(1)
Compared with Exclusion from Capital Assets	672	(1)
Corn Products Doctrine	673	(1)
Illustration 1	673	(1)
Illustration 2	674	(1)
How IRC § 1231 Applies to Gain and Losses	674	(1)
Computation of the Hotchpot	674	(1)
Gains and Losses Included	674	(1)
Gains Excluded	674	(1)
Gains and Losses from Certain Involuntary Conversions	675	(1)
Unrecaptured Section 1250 Gain	675	(1)
Recapture of Net Section 1231 Losses	675	(1)
Allocation of Recapture	675	(1)
Illustrations: Operation of IRC § 1231	676	(1)
Illustration 1	676	(1)
Illustration 2	676	(1)
Illustration 3	677	(1)
Illustration 4	677	(1)
Illustration 5	678	(1)
Illustration 6	678	(1)
Recapture of Depreciation: General	679	(1)
Illustration of Purported Abuse of Trading a Capital Gain for Ordinary Deductions	679	(1)
Statutory Imposition of Recapture	679	(1)
IRC § 1245: In General	680	(1)
Priority of Recapture of Depreciation Deductions	680	(1)
Section 1245 Property	681	(1)
Computation of Ordinary Income	682	(1)
Recomputed Basis	682	(1)
Illustration 1	682	(1)
Illustration 2	683	(1)
Illustration 3	683	(1)
Illustration 4	683	(1)
Exceptions to IRC § 1245	684	(1)
Recapture of Depreciation Taken on Buildings	684	(1)
Recapture for the Disposition of Buildings That Were Placed into Service Between 1981 and 1986	685	(1)
Current Treatment	685	(1)
Corporate Disposition	686	(1)
Sale of a Business	686	(1)
Gain and Loss	686	(1)
Goodwill	686	(1)
Going Concern Value	687	(1)
Covenant Not to Compete	687	(1)
Substance over Form Doctrine---Availability to Taxpayer	688	(3)
Assignment and Anticipation of Income, ``Kiddie Tax,'' and Installment Sales	691	(28)
Assignment and Anticipation of Income, ``Kiddie Tax,'' and Installment Sales	691	(28)
Splitting of Income	691	(1)
Illustration	691	(1)
Devices	691	(1)
Citizens of Community Property States	691	(1)
Citizens of States Having a Marital Property Act	692	(1)
Anticipatory Assignment of Income	692	(1)
Assignment of Income from Services	692	(1)
Illustration of Attempted Income Splitting	692	(1)
Illustration: Assignment of Renewal Commissions	692	(1)
Services in Consideration of Payment to Third Parties	693	(1)
Illustration 1	693	(1)
Illustration 2	693	(1)
Illustration 3	694	(1)
Assignment of Income from Property	694	(1)
Illustration	694	(1)
Assignment of Income Interest	695	(1)
Illustration 1: Transfer of Interest from Bonds	695	(1)
Illustration 2: Transfer of Term Interest for a Period of Less Than Ten Years	696	(1)
Illustration 3: Transfer of Entirety of Transferor's Interest	696	(1)
Illustration 4: Transfer of Fraction of Transferor's Interest or Transfer of an Annuity for the Period of the Transferor's Interest	697	(1)
Illustration 5: Transfer of Term Interest for a Period of More Than Ten Years	697	(1)
Illustration 6: Income Earned by an Agent	698	(1)
Conversion of Services to Property	698	(1)
Discharge of Debt	699	(1)
Waiver of Statutory Fee	700	(1)
Anticipation of Future Income	700	(1)
Illustration 1	700	(1)
Illustration 2	701	(1)
Illustration 3	701	(1)
Illustration 4	701	(1)
Illustration 5	702	(1)
Change of Timing of Recognition	702	(1)
Family Partnerships	702	(1)
General	702	(1)
Income Splitting	703	(1)
Judicially Imposed Restriction	703	(1)
Statutory Resolution	703	(1)
Bona Fides	704	(1)
Corporate Tax Parallel	704	(1)
Taxation of Child's Unearned Income---Kiddie Tax	704	(1)
Income Splitting with Minor Children	704	(1)
Dependent's Deduction for Personal Exemption	705	(1)
Dependent's Use of Standard Deduction	705	(1)
Kiddie Tax on Passive Income	705	(1)
Children Who Are Subject to the Kiddie Tax	705	(1)
Operation of the Kiddie Tax	706	(1)
``Earned Income''	706	(1)
Net Unearned Income	706	(1)
Amount of Child's Income That is Subject to Kiddie Tax	707	(1)
Application of the Kiddie Tax	707	(1)
Computation of the Child's Tax	707	(1)
Partial Tax on Net Unearned Income---The ``Allocable Parental Tax''	708	(1)
Total Tax Liability	708	(1)
Illustrations	708	(1)
Illustration 1	709	(1)
Illustration 2	709	(1)
Illustration 3	710	(1)
Sales Under the Installment Method	711	(1)
Property Disqualified from Installment Treatment	711	(1)
Sale of Depreciable Property to or by a Controlled Entity	712	(1)
Recognition of Recapture Income	712	(1)
Contingent Selling Price	712	(1)
Nondealer Dispositions	713	(1)
Interest Payments	713	(1)
Pledges of Installment Obligations	714	(1)
Installment Sale to Related Party	714	(1)
Definitions	714	(1)
Selling Price	714	(1)
Total Contract Price	715	(1)
Gross Profit	715	(1)
Payments	715	(1)
Installment Reporting	715	(1)
Illustration	715	(1)
Disposition of Installment Obligation	716	(1)
Illustration	716	(1)
Exceptions	717	(1)
Cancellation at Obligee's Death	717	(1)
Change of Terms of Installment Obligation	717	(2)
Income in Respect of a Decedent (IRD)	719	(6)
Income in Respect of a Decedent (IRD)	719	(6)
Definition of ``Income in Respect of a Decedent'' (IRD)	719	(1)
Common Examples of IRD	719	(1)
Reporting of IRD	720	(1)
Illustrations of IRD	721	(1)
Illustration 1	721	(1)
Illustration 2	721	(1)
Characterization	721	(1)
Basis	721	(1)
Disposition of Rights to IRD	721	(1)
General	721	(1)
Illustration	722	(1)
Exceptions	722	(1)
Income Tax Deductions Allowed	722	(1)
Deductions for Federal Estate Taxes Paid	722	(1)
Net Value of IRD	723	(1)
Computation of Deduction for IRD	723	(1)
Collection of a Portion of an IRD Item	723	(1)
Deduction in Respect of a Decedent	723	(1)
Restriction	724	(1)
Double Deductions Allowed	724	(1)
Table of Internal Revenue Code Sections	725	(10)
Index	735