Primary-Internal Revenue Code

Secondary-Treasury Regulations

• Interpretive
• Legislative
• Procedural

 Other-

• Revenue Rulings-Passed by the IRS (ex:99-7 (7th ruling in 1999)
• Revenue Procedures

1st level

• US Tax court-challenge a tax
• Federal Deistrict Court -pay the tax, challenge gov for a refund
• Court of Federal Claims-Also must pay first

2nd Level

• US Court of Appeals

3rd Level

• Supreme Court-as good as the tax law approving it (IRC)

Gross Income

-Deductions for AGI (section 62)

=Adjusted Gross Income

-Greater of Itemized or standard deductions

-Exemptions

=Taxable Income 

x%

=Income Tax

Income Tax

+Other Taxes

-Tax Credits

-Prepayments (witholdings/quarterly estimates)

=Tax Due/Refund

Net Capital Gains (Long term)/Qualified Dividends=0-15%

Collectibles (works of art)=28%

Unrecaptured Sec. 1250 Gain (sale of real estate depr.)=25%

a)Choose the lesser of 1)over 25% # (35,350 for single)

2)Taxable Income-Net Capital Gains (Not 1250 or Collect)

b)Choose the greater of 1)Taxable income-NCG-1250-Collect

2)The answer from part a

c)Tax cannot exceed part b (subtract the # over 25%-Part b) That number is taxed at 0%

d)Tax formula for part B

+(NCG-CG taxed at 0%) x15%

+1250 gain x25%

+Collect x28%

(only do 1250 and collectibles if part C is not 0)

Over 65 or blind

If both are over 65 and blind then they get 4x additional standard deduction

Basic SD cannot be greater than 1)950

2)EI+300

(If over $5950 than SD will be $5950)

a)Individual who bears a relationship to taxpayer

b)who lives in the same house as taxpayer for 1/2 of year

c)who is younger than taxpayer and has not turned 19 by end of taxable year or student who is not 24 by end of year

d)who has not provided 1/2 of own support for the calendar year

e)who has not filed a joint return with the inidvidual's spouce

custodial spouce can give exemption to non-custodial spouce

parent beats out a non-parent in tiebreaker

Must be a relative

Must live with taxpayer for entire year

Taxpayer provides over 50% of support

(dont include scholarships)

custodial parent can give exemption to noncustodial spouce

If no one provides more than 50%

There is a "but for" group

but for group=members that live with qualified relative 

and they provide more than 10% (not just 10%)

Any member of the but for group can decide who gets the exemption

Applies to

1)Child under 18

2)Full time student under 24

3)Child under 19 who's EI <=1/2 Support

Unearned income of child is charged at parents income %

(must add unearned income to parent's tax to get parents %)

Child AGI

(lesser of 5950 or 950 [basic dependant SD])

=AGI

-unearned income

=Earned income (taxed at 10%

unearned income

-1,900

(add to parents income to decide tax %) 

(might cross 2 brackets so must subtract the amount taxed at the lower bracket)

Are generall recognized

Exclusion if

1)Recipiant did not enter contest

2)Recipiant did not render services

3)Recipiant donated to charity or government

A scholarship prize is not recognized in gross income

$400

or 1,600 if Qualified plan

Value of award

-Employees gross income

1) Paid in cash

2)Parties are living apart

3)Payments stop after payee's death

4)No contrary designation that says it is not alimony