Fundamentals of Federal Income Taxation

by Lathrope, Daniel

• ISBN13: 9781599417004
• ISBN10: 1599417006
• Edition: 15th
• Format: Hardcover
• Copyright: 2009-07-15
• Publisher: Foundation Pr

Summary

This casebook provides detailed information on federal income taxation, with specific assignments to the Internal Revenue Code, selected cases, and administrative rulings from the Internal Revenue Service. The revised and updated Fifteenth Edition retains the book?s long standing format and much of its prior materials, but it is updated to reflect recent events including all legislative developments, especially the American Recovery and Reinvestment Act of 2009. The new edition contains coverage of changes in the cost recovery system, the rules related to principal residences, and personal tax credits. Coverage of personal tax credits has been substantially revised to include sections on the American Opportunity Tax Credit, the Making Work Pay Credit, and the First-Time Homebuyer Credit. The material on computation of tax liability has also been updated to consider some of the changes contained in President Obama's 2009 Budget Message. The problems have been updated and recent cases and rulings have been selectively added to the text. The Text is accompanied by an extensive Teachers' Manual containing answers to the problems, comments on cases not contained in the text, and suggestions on teaching the course.

Table of Contents

Preface	p. v
Table of Internal Revenue Code Sections	p. xxix
Table of Treasury Regulations	p. lxxi
Table of Internal Revenue Rulings	p. lxxix
Table of Miscellaneous Rulings	p. lxxxi
Table of Cases	p. lxxxiii
Table of Authorities	p. xcv
Introduction	p. 1
Orientation	p. 2
A Look Forward	p. 2
A Glimpse Backward	p. 5
The Income Tax and the United States Constitution	p. 10
The Tax Practitioner's Tools	p. 17
Tax Policy Considerations	p. 29
The Road Ahead	p. 41
Identification of Income Subject to Taxation	p. 45
Gross Income: The Scope of Section 61	p. 46
Introduction to Income	p. 46
Equivocal Receipt of Financial Benefit	p. 47
Cesarini v. United States	p. 47
Old Colony Trust Co. v. Commissioner	p. 52
Commissioner v. Glenshaw Glass Co.	p. 54
Charley v. Commissioner	p. 58
Income Without Receipt of Cash or Property	p. 64
Helvering v. Independent Life Ins. Co.	p. 64
Revenue Ruling 79-24	p. 64
Dean v. Commissioner	p. 65
The Exclusion of Gifts and Inheritances	p. 67
Rules of Inclusion and Exclusion	p. 67
Gifts	p. 68
The Income Tax Meaning of Gift	p. 68
Commissioner v. Duberstein	p. 69
Employee Gifts	p. 78
Bequests, Devises, and Inheritances	p. 80
Lyeth v. Hoey	p. 80
Wolder v. Commissioner	p. 85
Employee Benefits	p. 89
Exclusions for Fringe Benefits	p. 89
Exclusions for Meals and Lodging	p. 99
Herbert G. Hatt	p. 100
Awards	p. 105
Prizes	p. 105
Allen J. McDonell	p. 107
Scholarships and Fellowships	p. 111
Gain From Dealings in Property	p. 115
Factors in the Determination of Gain	p. 115
Determination of Basis	p. 116
Cost as Basis	p. 116
Philadelphia Park Amusement Co. v. United States	p. 116
Property Acquired by Gift	p. 120
Taft v. Bowers	p. 120
Farid-Es-Sultaneh v. Commissioner	p. 122
Property Acquired Between Spouses or Incident to Divorce	p. 127
Property Acquired From a Decedent	p. 129
The Amount Realized	p. 132
International Freighting Corporation, Inc. v. Commissioner	p. 132
Crane v. Commissioner	p. 135
Commissioner v. Tufts	p. 143
Life Insurance Proceeds and Annuities	p. 153
Life Insurance Proceeds	p. 153
Annuity Payments	p. 157
Discharge of Indebtedness	p. 163
United States v. Kirby Lumber Co.	p. 163
Zarin v. Commissioner	p. 164
Revenue Ruling 2008-34	p. 178
Damages and Related Receipts	p. 183
Introduction	p. 183
Damages In General	p. 184
Raytheon Production Corporation v. Commissioner	p. 184
Damages and Other Recoveries for Personal Injuries	p. 187
Revenue Ruling 79-313	p. 193
Separation and Divorce	p. 196
Alimony and Separate Maintenance Payments	p. 196
Direct Payments	p. 196
Indirect Payments	p. 206
I.T. 4001	p. 206
Property Settlements	p. 209
Young v. Commissioner	p. 213
Other Tax Aspects of Divorce	p. 218
Child Support	p. 218
Alimony Payments Made by a Third Party	p. 220
Divorce	p. 223
Other Exclusions From Gross Income	p. 227
Gain From the Sale of a Principal Residence	p. 227
Excerpts from Senate Report No. 105-33 (pages 35-37), and Conference Report No. 105-220 (page 387), 105th Cong., 1st Sess. (1997)	p. 228
Income Earned Abroad	p. 234
Exclusions and Other Tax Benefits Related to the Costs of Higher Education	p. 235
Federal Taxes and State Activities	p. 243
Identification of the Proper Taxpayer	p. 249
Assignment of Income	p. 250
Introduction	p. 250
Income From Services	p. 252
Lucas v. Earl	p. 252
Commissioner v. Giannini	p. 253
Revenue Ruling 66-167	p. 258
Revenue Ruling 74-581	p. 260
Income From Property	p. 263
Helvering v. Horst	p. 263
Blair v. Commissioner	p. 267
Estate of Stranahan v. Commissioner	p. 269
Susie Salvatore	p. 272
Revenue Ruling 69-102	p. 276
Income Producing Entities	p. 284
Introduction	p. 284
Trusts and Estates	p. 290
Corliss v. Bowers	p. 290
Helvering v. Clifford	p. 291
Partnerships	p. 300
Commissioner v. Culbertson	p. 300
Corporations	p. 307
Overton v. Commissioner	p. 307
Johnson v. Commissioner	p. 309
Borge v. Commissioner	p. 312
Deductions in Computing Taxable Income	p. 317
Business Deductions	p. 318
Introduction	p. 318
The Anatomy of the Business Deduction Workhorse: Section 162	p. 320
"Ordinary and Necessary"	p. 320
Welch v. Helvering	p. 320
"Expenses"	p. 323
Midland Empire Packing Co. v. Commissioner	p. 325
INDOPCO, Inc. v. Commissioner	p. 332
"Carrying On" Business	p. 341
Morton Frank v. Commissioner	p. 341
Specific Business Deduction	p. 349
"Reasonable" Salaries	p. 349
Exacto Spring Corporation v. Commissioner	p. 349
Harolds Club v. Commissioner	p. 356
Travel "Away From Home"	p. 363
Rosenspan v. United States	p. 363
Andrews v. Commissioner	p. 371
Revenue Ruling 99-7	p. 377
Necessary Rental and Similar Payments	p. 382
Starr's Estate v. Commissioner	p. 382
Expenses for Education	p. 387
Hill v. Commissioner	p. 388
Coughlin v. Commissioner	p. 392
Miscellaneous Business Deductions	p. 395
Introduction	p. 395
Business Losses	p. 403
Depreciation	p. 406
Introduction	p. 406
Sharp v. United States	p. 418
Simon v. Commissioner	p. 423
Special Depreciation Rules on Personal Property	p. 431
Special Rules on Realty	p. 442
Deductions for Profit-Making, Nonbusiness Activities	p. 447
Section 212 Expenses	p. 447
Higgins v. Commissioner	p. 447
Bowers v. Lumpkin	p. 451
Surasky v. United States	p. 454
Revenue Ruling 64-236	p. 459
Meyer J. Fleischman v. Commissioner	p. 459
Charges Arising Out of Transactions Entered Into for Profit	p. 468
William C. Horrmann v. Commissioner	p. 468
Lowry v. United States	p. 471
Deductions Not Limited to Business or Profit-Seeking Activities	p. 479
Introduction	p. 479
Tax Subsidies as a Device for Implementing Government Policy: A Comparison With Direct Government Expenditures	p. 480
Interest	p. 481
Revenue Ruling 69-188	p. 482
J. Simpson Dean v. Commissioner	p. 484
Taxes	p. 508
Cramer v. Commissioner	p. 508
Bad Debts, Charitable Contributions and Casualty and Theft Losses	p. 512
Restrictions on Deductions	p. 513
Introduction	p. 513
Deductions Limited to Amount at Risk	p. 517
Activities Not Engaged in for Profit	p. 520
Restrictions on Deductions of Homes	p. 522
Passive Activity Limitations	p. 528
Illegality or Impropriety	p. 542
Commissioner v. Tellier	p. 544
Deductions for Individuals Only	p. 548
The Concept of Adjusted Gross Income	p. 548
Excerpt From Senate Finance Committee Report No. 885	p. 548
Moving Expenses	p. 551
Extraordinary Medical Expenses	p. 556
Raymon Gerard v. Commissioner	p. 556
Revenue Ruling 2002-19	p. 558
Qualified Tuition and Related Expenses	p. 567
Personal and Dependency Exemptions	p. 569
The Standard Deduction	p. 574
Commissioner v. Banks	p. 577
The Year of Inclusion or Deduction	p. 587
Fundamental Timing Principles	p. 588
Introduction	p. 588
The Cash Receipts and Disbursements Method	p. 592
Receipts	p. 592
Charles F. Kahler v. Commissioner	p. 593
Williams v. Commissioner	p. 594
Cowden v. Commissioner	p. 596
Hornung v. Commissioner	p. 601
Disbursements	p. 605
Commissioner v. Boylston Market Ass'n	p. 605
Cathcart v. Commissioner	p. 609
Revenue Ruling 87-22	p. 610
Revenue Ruling 54-465	p. 613
Vander Poel, Francis & Co., Inc. v. Commissioner	p. 613
The Accrual Method	p. 618
Income Items	p. 618
Spring City Foundry Co. v. Commissioner	p. 619
Revenue Ruling 70-151	p. 620
North American Oil Consolidated v. Burnet	p. 620
New Capital Hotel, Inc. v. Commissioner	p. 623
Artnell Co. v. Commissioner	p. 625
Deduction Items	p. 636
Revenue Ruling 57-463	p. 637
Schuessler v. Commissioner	p. 637
Revenue Ruling 2007-3	p. 645
Forced Matching of Methods	p. 650
How Ineluctable is the Integrity of the Taxable Year?	p. 654
Taxpayer's Restoration of Previously Taxed Income	p. 654
United States v. Lewis	p. 654
Van Cleave v. United States	p. 658
The Tax Benefit Doctrine	p. 663
Alice Phelan Sullivan Corp. v. United States	p. 663
Income Averaging	p. 666
Statutory Averaging	p. 666
Do-It-Yourself Averaging	p. 667
Revenue Ruling 60-31	p. 667
Statutory Deferred Compensation and Medical Insurance Arrangements	p. 675
The Carryover and Carryback Devices	p. 679
The Characterization of Income and Deductions	p. 683
Capital Gains and Losses	p. 684
Introduction	p. 684
The Mechanics of Capital Gains	p. 689
The Mechanics of Capital Losses	p. 697
The Meaning of "Capital Asset"	p. 702
The Statutory Definition	p. 702
Mauldin v. Commissioner	p. 702
Malat v. Riddell	p. 705
The Sale or Exchange Requirement	p. 710
Kenan v. Commissioner	p. 710
Hudson v. Commissioner	p. 714
The Holding Period	p. 718
Revenue Ruling 66-7	p. 719
Revenue Ruling 66-97	p. 720
Judicial Gloss on the Statute	p. 725
"Income" Property	p. 725
Hort v. Commissioner	p. 725
Metropolitan Bldg. Co. v. Commissioner	p. 727
Watkins v. Commissioner	p. 733
Correlation With Prior Transactions	p. 737
Arrowsmith v. Commissioner	p. 737
United States v. Skelly Oil Co.	p. 741
Statutorily Created Capital Gain and Loss Consequences	p. 746
In General	p. 746
Section 1231 Recharacterization	p. 751
Stephen P. Wasnok v. Commissioner	p. 754
Williams v. McGowan	p. 758
Characterization on the Sale of Depreciable Property	p. 764
Introduction	p. 764
Characterization Under Section 1239	p. 764
United States v. Parker	p. 765
Recapture Under Section 1245	p. 770
Revenue Ruling 69-487	p. 775
Recapture of Depreciation on the Sale of Depreciable Real Property	p. 776
Deductions Affected by Characterization Principles	p. 780
Bad Debts and Worthless Securities	p. 780
Howard S. Bugbee v. Commissioner	p. 780
Charles J. Haslam v. Commissioner	p. 789
The Charitable Deduction	p. 794
Revenue Ruling 83-104	p. 794
Revenue Ruling 67-246	p. 799
Casualty and Theft Losses	p. 817
Nature of Losses Allowed	p. 817
Revenue Ruling 63-232	p. 818
Pulvers v. Commissioner	p. 820
Mary Frances Allen v. Commissioner	p. 821
Other Aspects of Casualty and Theft Losses	p. 823
Deferral and Nonrecognition of Income and Deductions	p. 829
The Interrelationship of Timing and Characterization	p. 830
Transactions Under Section 453	p. 830
The General Rule	p. 830
Contingent Sales Price	p. 832
Situations in Which Section 453 is Inapplicable	p. 835
Special Rules Related to Section 453	p. 837
Transactions Outside of Section 453	p. 848
Open Transactions	p. 848
Burnet v. Logan	p. 848
Closed Transactions	p. 855
The Original Issue Discount Rules and Other Unstated, Hidden, and Imputed Interest	p. 857
Property Transferred in Connection with Services	p. 865
Income in Respect of Decedents	p. 872
Disallowance of Losses	p. 879
Losses Between Related Taxpayers	p. 879
McWilliams v. Commissioner	p. 879
Wash Sales	p. 886
Nonrecognition Provisions	p. 889
Introduction	p. 889
Like Kind Exchanges	p. 891
The Like Kind Exchange Requirements	p. 891
Bloomington Coca-Cola Bottling Co. v. Commissioner	p. 892
Commissioner v. Crichton	p. 892
Leslie Co. v. Commissioner	p. 895
Three-Cornered Exchanges	p. 902
Revenue Ruling 77-297	p. 903
Other Section 1031 Issues	p. 907
Involuntary Conversions	p. 911
Harry G. Masser v. Commissioner	p. 913
Clifton Inv. Co. v. Commissioner	p. 914
Revenue Ruling 76-319	p. 917
Revenue Ruling 67-254	p. 918
Revenue Ruling 71-41	p. 919
Other Nonrecognition Provisions	p. 922
Converting Taxable Income Into Tax Liability	p. 927
Computations	p. 928
Tax Rates	p. 928
Credits Against Tax	p. 941
Introduction	p. 941
Personal Credits	p. 943
Credits for Prepaid Taxes	p. 948
The Alternative Minimum Tax	p. 949
Klaassen v. Commissioner	p. 957
Federal Tax Procedure and Professional Responsibility	p. 963
Procedure and Professional Responsibility	p. 964
Overview of Federal Tax Procedure	p. 964
Introduction	p. 964
The Self-Assessment System	p. 965
Administrative Procedures	p. 966
Judicial Procedures	p. 973
Collection of Taxes	p. 981
Special Rules Applicable to Deficiency Procedures	p. 984
Timing Rules, Interest and Penalties	p. 984
The Innocent Spouse Rules	p. 988
Special Rules Applicable to Refund Procedures	p. 991
Professional Responsibility Issues	p. 995
Index	p. 1001
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