Principles of Federal Income Taxation: Concise

by Posin, Daniel Q.; Tobin, Donald B.

• ISBN13: 9780314161468
• ISBN10: 0314161465
• Edition: 7th
• Format: Paperback
• Copyright: 2005-07-30
• Publisher: West Academic

Summary

Thomson West understands that, over time, teaching and learning methods change. Concise Hornbooks have been developed specifically to provide for the needs of today's law student. The series features concise analyses of basic areas of law by prominent legal scholars.

Table of Contents

Special Note	p. vii
Highlights	p. xi
Table of Illustrations	p. xxix
Introduction	p. 1
History, Policy and Structure
A Brief History of Income Taxation	p. 9
In General	p. 9
The American Income Tax	p. 11
Theoretical Aspects of Income Taxation	p. 17
Progressivity, The Marginal Rate of Tax and the Effective Rates of Tax	p. 17
Alternatives to the Income Tax	p. 18
Value Added Tax	p. 18
Net Worth or Wealth Taxes	p. 19
Head Tax	p. 19
Consumption or Cash Flow Tax	p. 20
The "Flat Rate Tax"	p. 21
Problems With the Income Tax	p. 22
Allocation of Resources: Imputed Income	p. 22
Comprehensive Tax Base	p. 26
Tax Expenditures	p. 29
Complexity	p. 32
Recovery of Capital: A Major Theme in the Field	p. 33
Methods of Recovering Capital	p. 33
Application to Easements: Inaja Land	p. 44
Inflation: Kerbaugh-Empire	p. 45
Other Theoretical Problems	p. 48
Structure of the Internal Revenue Code	p. 49
Income in General; Compensation for Services
What Constitutes Income in General: Cesarini, Old Colony Trust, Glenshaw Glass and Drescher	p. 51
Fringe Benefits	p. 59
Miscellaneous Benefits Under [section] 132	p. 59
Meals and Lodging	p. 62
Group Term Life Insurance	p. 65
Employee Death Benefits	p. 65
Accident and Health Benefits	p. 65
Bargain Purchases of Stock or Other Property and Stock Options	p. 66
Unrestricted Property	p. 66
Restricted Property	p. 67
General Rule	p. 67
Incentive Stock Options	p. 68
Section 83	p. 68
Election	p. 72
Stock options under [section] 83	p. 74
How Not to Pay Tax on a Billion Dollars: Deferred Compensation Goes Better With Coke	p. 75
Other Items of Compensation Income	p. 75
Tips	p. 76
Strike Payments	p. 77
Other Miscellaneous Items of Compensation Income	p. 77
Other Items of Income and Exclusions from Income
Interest	p. 80
In General	p. 80
Tax Exempt Interest	p. 81
Private Activity Bonds; Qualified Bonds	p. 82
Original Issue Discount	p. 83
Background	p. 83
The 1982 Rules	p. 85
Dividends and Other Distributions to Stockholders	p. 86
Rents	p. 89
In General	p. 89
Royalties	p. 89
In General	p. 89
Advance Royalties: It's Only a Paper Moon	p. 90
Proceeds From Life Insurance	p. 92
Annuities	p. 96
Gifts and Inheritances	p. 101
Rationale for Excluding	p. 101
Definition of "Gift": Duberstein	p. 101
Gifts of Income From Property	p. 108
Inheritances	p. 109
In General	p. 109
Transfers in Trust: Irwin v. Gavit	p. 111
Prizes, Scholarships and Fellowship Grants	p. 117
Prizes: McDonell	p. 117
Scholarships and Fellowship Grants	p. 118
Discharge of Indebtedness	p. 121
General Rule and Background: Old Colony Trust; Clark; Kirby Lumber; Zarin	p. 121
Insolvent or Bankrupt Debtor	p. 131
Recovery of Damages to the Person or Business	p. 136
In General	p. 136
Damages From Personal Injuries	p. 136
Damages From Injuries to Business; Raytheon	p. 140
Damages to Capital	p. 143
Alimony and Similar Payments	p. 143
Miscellaneous Items of Income and Exclusions From Income	p. 144
In General	p. 144
Illegal Income: The Fantastic Saga of Wilcox, Rutkin and James	p. 144
Income from Dispositions of Property
Overview	p. 148
The Requirement of a Realization	p. 152
In General: Macomber, Bruun, Cottage Savings	p. 152
Marital Property Settlements and Other Satisfactions of Obligations: Davis; Farid-Es-Sultaneh	p. 166
Computation of Gain or Loss Realized	p. 171
Amount Realized	p. 172
Adjusted Basis	p. 173
Background	p. 173
Cost Basis	p. 174
In General	p. 174
Mortgages and Other Debts of the Purchaser or Seller: Crane	p. 175
Mortgaging Property Held: Woodsam	p. 184
The "Footnote 37" Problem: Tufts; Diedrich	p. 191
Adjustment of the Purchase Price	p. 197
Bargain Purchases of Property by Shareholders or Employees	p. 197
Miscellaneous Problems	p. 198
Carryover Basis	p. 198
Gifts; Taft	p. 198
Transfers in Trust	p. 204
Substituted Basis	p. 205
Fair Market Value Basis: Property Acquired From a Decedent	p. 205
Present Rule	p. 205
Property Acquired From a Decedent: The Saga of Carryover Basis	p. 206
Property Acquired From a Decedent: The Saga of Carryover Basis continued	p. 207
Special Rules for Stock, Securities and Mutual Fund Shares	p. 209
Adjustments to Basis: The Basis as History	p. 210
Disallowance of Some Losses and Exclusion of Some Gains	p. 210
In General	p. 210
Losses From Sales of Residence or Other Personal-Use Property	p. 211
Losses From Sales of Property in Activities Not Engaged in for Profit	p. 213
Disallowance of Losses Versus Nonrecognition of Losses	p. 213
Exclusion of Gain From Sale of Residence	p. 213
Recognition of Gain or Loss	p. 217
In General	p. 217
Tax-Free Exchanges of Business or Investment Property of "Like Kind"	p. 220
Overview	p. 220
Mortgages	p. 229
The Requirement That the Property Be of "Like Kind"	p. 230
Real Property; Jordan Marsh	p. 230
Personal Property	p. 234
The Requirement That the Property Be Held for Productive Use in Trade or Business or for Investment	p. 235
Three-Cornered Exchanges	p. 235
Tax-Free Involuntary Conversions (Condemnations, Casualties) Where Proceeds Reinvested	p. 237
General Rules	p. 237
Involuntary Conversions of Real Estate	p. 239
Other Tax-Free Transactions	p. 242
Wash Sales of Stock or Securities	p. 242
Losses on Sales and Exchanges Between Related Taxpayers	p. 245
In general	p. 245
"Related Taxpayers"; Constructive Ownership Rules	p. 246
Use of Disallowed Loss by Buyer	p. 249
Character of Gain or Loss: Capital Gains	p. 251
The Preferential Treatment of Capital Gains	p. 251
The Rules for Taxing Capital Gains and Losses	p. 252
Background	p. 252
The Mechanics	p. 253
Capital Gain Rules Under the 1997 Act	p. 254
Capital Loss Rules	p. 266
Planning Implications	p. 268
Holding Appreciated Property Indefinitely	p. 268
Holding an Appreciated Capital Asset Longer Than Its Required Holding Period	p. 269
Selling Property That Has Declined in Value	p. 269
Combined Gains and Losses	p. 270
Holding Period Problems; Short Sales	p. 272
Tax Straddles	p. 279
Definition of Capital Gains and Losses	p. 282
Statutory and Judicial Rules	p. 283
Inventory, Property Held Primarily for Sale to Customers	p. 284
"Corn Products" Assets	p. 289
Depreciable and Real Property Used in a Trade or Business	p. 292
Section 1231 Treatment	p. 294
Copyrights, Literary or Other Artistic Compositions Created by the Taxpayer, Memoranda Held by the Taxpayer and Similar Property	p. 301
Patents	p. 303
Recapture of Depreciation	p. 306
Sale of Depreciable Property to a Related Party	p. 310
Accounts Receivable	p. 312
Transfers of Franchises, Trademarks and Trade Names	p. 312
Cancellation of Lease or Distributor's Agreement	p. 312
Retirement of Bonds	p. 313
Worthless Securities	p. 313
Bad Debts	p. 313
General Comments on the Sale or Exchange Requirement	p. 314
Planning Implications: Sale of a Going Business	p. 315
Policy Aspects of Capital Gains Taxation	p. 319
Exotic Wall Street Techniques Employed by the Wealthy to Avoid Capital Gains: of ESOP Sales, Upreits, Equity Swaps, Shorting Against the Box, Swap Funds, DECS and the Like: Congressional Response to Some of These Techniques	p. 322
Assignment of Income: Who is Taxed and the Nature of the Tax
Background	p. 329
Gratuitous Assignments of Income: Birth of a Metaphor	p. 331
Assignments of Income for Consideration	p. 336
Application of Assignment of Income Doctrine	p. 340
Oil, Gas, and Other Minerals	p. 340
Leases	p. 341
Gratuitous Assignments	p. 341
Assignments for Consideration-Cancellation of the Lease by Landlord or Tenant	p. 341
Assignments for Consideration-Third Party Transactions	p. 343
Trusts	p. 345
Creation of the Trust	p. 345
Related Topics	p. 345
How to Pay for Law School (?): Below Interest Loans	p. 345
Unearned Income of Children	p. 350
Alimony	p. 350
Assignment of Income Without Tears	p. 351
Business Deductions
Structural Issues in General	p. 354
Putting the Tax Code on the Back of an Envelope	p. 354
The Deep Structure of the Tax System	p. 357
The Statutory Structure of the Tax System	p. 359
Deductions Arising Out of Business and Profit Seeking Activity	p. 362
Common Business Expenses	p. 362
Ordinary and Necessary Business Expenses	p. 362
Travel and Transportation Expenses: Flowers; Hantzis; Andrews; Correll	p. 370
The Dichotomy Between Deduction and Capital or Personal Expenses	p. 380
Necessary Rental and Similar Payments; Starr's Estate; Fitzpatrick	p. 380
Education Expenses	p. 384
The Law; Hill; Coughlin	p. 384
The Economics: What Does It Really Cost to Go to Law School?	p. 388
Expenses for the Production of Income, or for the Maintenance of Investment Property: Higgins; Gilmore; Estate of Baier; Surasky; Myer J. Fleischman; Horrmann; Lowry	p. 389
Miscellaneous Business and Pleasure Travel Expenses: Rudolph	p. 394
Entertainment, Amusement and Recreation Expenses: Sutter; Cohan; Sanitary Farms	p. 396
Limits on Deductibility of Business Meals: Sutter Lives	p. 403
The Substantiation Requirement for Travel, Entertainment, and Business Gifts	p. 404
Moving Expenses	p. 406
Activities Not Engaged in for Profit	p. 407
Office in the Home; Soliman	p. 412
Rental of Vacation or Other Homes	p. 417
Depreciation and Accelerated Cost Recovery	p. 422
Background	p. 422
Rationale for Depreciation	p. 422
Inflation Problems	p. 424
Basic Methods of Depreciation	p. 426
The Myth That Accelerated Depreciation Stimulates Investment in Plant and Equipment	p. 429
"Sinking Fund" Depreciation	p. 431
The ACRS System; Sharp	p. 434
Other Business Deductions	p. 438
Depletion	p. 438
Intangible Drilling and Development Costs	p. 439
Bond Premium	p. 440
Purchased Intangibles: Section 197; Newark Morning Ledger	p. 440
Miscellaneous Rapid Write-Offs	p. 442
Alimony and Similar Payments; The Marriage Tax	p. 443
Alimony and Property Settlements	p. 443
Property Settlements; Davis	p. 447
The Marriage Tax: Once More With Feeling	p. 448
Limitations on Deductions	p. 451
In General	p. 451
The Limit of Reasonable Compensation for Services	p. 452
In General	p. 452
The Problems of the Double Tax on Corporate Dividends	p. 452
The Limit of Personal Expenses	p. 455
Miscellaneous Personal Expenses: Smith	p. 455
Education Expenses	p. 457
The Limit of Capital Expenditures: Welch, Mt. Morris Drive-In; Midland Empire; Morton Frank; INDOPCO	p. 457
The Limit of Public Policy	p. 472
Background	p. 472
Illegal Bribes, Kickbacks and Other Payments	p. 472
Fines and Penalties	p. 474
Treble Damage Payments Under the Antitrust Laws	p. 474
Expenses to Influence Legislation and Elections	p. 475
Other Limits	p. 476
Expenses and Interest Relating to Tax Exempt Income: Tax Arbitrage	p. 476
Sham Transactions or Transactions Lacking Economic Substance: Knetsch	p. 479
Itemized Deductions and Personal Exemptions
Itemized Deductions	p. 487
In General	p. 487
Expenses of Tax Advice, Attorneys' Fees, and Litigation	p. 489
Tax Advice and Litigation	p. 489
Attorneys' Fees Generally	p. 489
Interest	p. 490
Taxes; Cramer	p. 498
Casualties and Other Losses	p. 500
Casualties	p. 500
Other Losses	p. 506
Bad Debts and Worthless Securities: Whipple	p. 508
Bad Debts	p. 508
Worthless Securities	p. 513
Medical Expenses: Ochs	p. 514
Charitable Contributions	p. 519
In General	p. 519
Percentage Limits	p. 524
New Rules	p. 526
Vehicle donations	p. 526
Noncash Charitable Contributions	p. 527
Floor on Miscellaneous Itemized Deductions	p. 527
The Standard Deduction	p. 529
Personal and Dependency Exemptions	p. 530
Exemption Amount	p. 530
Qualifying Child	p. 531
Alternative Minimum Tax	p. 532
Tax Planning
Introduction	p. 541
Tax Shelters	p. 542
The Building Blocks of Tax Shelters	p. 542
The "At Risk" Limitations	p. 548
In General	p. 548
The Collapse of the Savings & Loan Industry	p. 553
Passive Activity Losses	p. 553
In General	p. 553
Relationship Between the "At Risk" Rules and the Passive Activity Loss Rules	p. 555
Judicial and Administrative Limitations: Franklin	p. 555
Corporate Tax Shelters	p. 558
Other Tax Avoidance Techniques	p. 565
Corporate Inversion	p. 565
Corporate Owned Life Insurance	p. 566
Foreign Credit Cards	p. 566
Tax Shelters Without Tears	p. 567
Deferred Payment Sales: Logan	p. 568
In General	p. 568
The Installment Method of Reporting	p. 574
Deferred Compensation: A Survey	p. 576
In General	p. 576
Non-Qualified Plans	p. 577
Current Razzle-Dazzle Executive Compensation Techniques	p. 577
Incentive Stock Options	p. 583
Qualified Plans	p. 584
Festival of IRA's	p. 585
Deductible IRA	p. 585
Roth IRA	p. 586
Nondeductible IRA	p. 586
Spousal IRA	p. 586
Education IRAs (now referred to as Coverdell Education Savings Accounts)	p. 587
Strategies for Investing in IRAs	p. 588
Section 529 plans-Qualified Tuition Programs	p. 590
A Bird's Eye View of Sophisticated Estate Planning	p. 591
Tax Accounting
In General	p. 597
Transactional Problems	p. 599
Annual Accounting: Sanford & Brooks	p. 599
Claim of Right: North American Oil; Lewis	p. 602
The Tax Benefit Rule	p. 609
In General: Alice Phelan Sullivan Corp.	p. 609
Equitable Applications: Hillsboro	p. 614
Accounting Methods	p. 614
Overview	p. 614
The Cash Method	p. 615
In General	p. 615
Constructive Receipt	p. 617
Accounts Receivable	p. 620
Application: Executive Compensation Arrangements	p. 620
Prepaid Expenses	p. 622
The Accrual Method	p. 623
In General	p. 623
Income	p. 624
Deductions: General Dynamics	p. 625
Current Law: Economic Performance	p. 627
Prepaid Income: American Automobile Association; Schlude	p. 628
Credits
In General	p. 633
Child etc. Care Credit: Smith	p. 634
Other Credits	p. 637
Speculations on an Investment Tax Credit	p. 638
Earned Income Credit ("EIC")	p. 639
Child Tax Credit	p. 640
Hope Scholarship Credit and Lifetime Learning Credit: Recap of Tax Assistance to Education	p. 642
Deduction for Qualified Tuition	p. 643
Deduction of Interest on Educational Loans	p. 644
The HOPE Scholarship Credit and the Lifetime Learning Credit	p. 644
Ethics
General Comments	p. 647
Standards for Advising Taxpayers on Return Positions	p. 649
ABA Formal Opinion 85-352	p. 649
IRS Circular 230-Best Practices and Other Standards	p. 652
Section 6694	p. 653
Tax Shelter Rules	p. 655
ABA Opinion 346	p. 656
Circular 230-Tax Shelter Opinions	p. 657
I.R.C. [section] 6700-Abusive Tax Shelters	p. 658
Conclusion	p. 659
Appendix: The Miraculous Effects of the Time Value of Money	p. 661
Capital Gains Rules	p. 691
Table of Cases	p. 693
Table of Internal Revenue Code Sections	p. 703
Table of Treasury Regulations	p. 715
Table of Revenue Ruling	p. 719
Index	p. 723
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