Term
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Definition
Personal, Living, and Family Expenses
(a) no deductions for these expenses
(b) the first phone line is a personal expense
Also house losses are excluded from being deducted under this provision |
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Term
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Definition
Trade or Business Expenses
(a) In General there shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business including:
(1) Reasonable allowance for salaries
(2) traveling expenses
(3) rentals |
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Term
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Definition
Gross Income
(a) Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including:
Gross income, Gains, Interest, Rents, Royalties, Dividends, Alimony, Annuities, Income from Life Insurance, Pensions, Income from discharge of indebtedness, distributive share of partnership, income in respect of a decedent, and income from an interest in an estate |
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Term
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Definition
Capital Expenditures
(a) No deduction shall be allowed for
1) any amount paid out for new buildings or permanent improvements
2) Any amount expended in restoring property or in making good the exhaustion thereof for which an allowance is or has been made |
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Term
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Definition
Start Up Expenditures
(a) Capitalization of expenditures--Except as otherwise provided in this section, no deduction shall be allowed for start-up expenditures |
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Term
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Definition
Disallowance of Certain Entertainment Expenses
(a)(1) No deduction otherwise allowable under this chapter shall be allowed for any item
(A) Activity--something considered as entertainment, amusement, or recreation |
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Term
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Definition
Directly related entertainment defined
Except as otherwise provided in (d) or (f) no deduction shall be allowed for any expenditure for entertainment unless the taxpayer establishes that the expenditure was directly related to the active conduct of his trade or business within the meaning of this paragraph |
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Term
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Definition
Associated Entertainment
except as provided in paragraph (f) any expenditure for entertainment which is not directly related to the active conduct of the taxpayer's trade or business will not be allowable as a deduction unless-- |
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Term
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Definition
Qualified Tuition and Related Expenses
(a) In the case of an individual, there shall be allowed as a deduction an amount equal to the qualified tuition and related expenses paid by the taxpayer during the taxable year. |
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Term
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Definition
Case where the people found money inside the piano
It is the example of realization--> Even though they did not discover the money until a number of years until after they purchased the piano, it wasn't realized until it was actually found
If objects are found, they are not realized until sold |
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Term
| Old Colony Trust v. Commish |
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Definition
Wool Executives that get their taxes paid by the company
This is considered extra income and has to be taxed |
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Term
| Commissioner v. Glenshaw Glass Co. |
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Definition
Are punitive damages includable as gross income
"Here we have instance of undeniable accessions to wealth, clearly realized, and over which the taxpayers have complete dominion.”-->they are includable |
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Definition
| the people have to transfer their house to the bank but are still living in it, and the commissioner includes this as income |
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Definition
Guy gets a Caddy in exchange for a client list
SCOTUS--[a gift] "proceeds from a detached and disinterested generosity out of affection, respect, admiration, charity or like impulses."
The guy who gave it to him took it as a business expense-->it couldn't be included as a gift |
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Definition
Son challenged Grandmothers will that gave a great deal to Christian Science
Rule: Since he was an heir, it could automatically be deducted from Gross Income |
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Definition
Attorney trades stock for lifetime services
Although they contested it was a bequest of stock, it was an exchange for services, therefore it was includable as gross income |
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Term
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Definition
If the decedent allows the executor/trix of estate to receive a bequest “in lieu of compensation” then it can be a bequest and excludable under §102
1. A bequest made to an executor, to be in lieu of all compensation or commission to which he would otherwise be entitled a such, is upon an implied condition that he clothe himself in good faith with the character of executor, but its payment is not conditioned upon actual service in that capacity. P. 263 U. S. 184.
2. Bequests of that kind were exempted from tax under the Income Tax Act of October 3, 1913, which taxed "the income from but not the value of property acquired by gift, bequest, devise or descent." Id.
3. Taxing statutes are not to be extended by implication beyond the clear import of the language used, and doubt as to the meaning of their words must be resolved against the government and in favor of the taxpayer. |
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Term
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Definition
Guy and wife go to Hawaii with a bunch clients
The trip costs were not to be included as gross income because they were incurred while on business matters |
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Term
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Definition
Welch's old business had declared bankruptcy, and after moving on to the next job he went about paying those debts, despite the fact that they had been absolved through bankruptcy
Q: Could these payments be deductible business expenses?
A: These payments were extraordinary, and in order to be includable they must be considered necessary and ordinary (question of time, place, and circumstance)
-Necessary is defined as "helpful and appropriate"
The court concludes that these payments were capital expenses |
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Term
| Midland Empire Packing Co. v. Commissioner |
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Definition
Meat packing plant is inspected and instructed that it is going to be shut down unless it fixes the oil leaks
It is determined that it is a necessary business expense--> Although it was extraordinary, the repair didn't adapt the meat packing plant to a different use, or expand the type of business that could be carried on, so it is still deductible
Just because it is a capital expense doesn't mean it can't be deducted §179 |
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Term
| Morton Frank v. Commissioner |
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Definition
Man and wife go around in search of a radio station to buy
Their travel expenditures are not deductible because they were not in the process of conducting a business directly before or during their search
This is later changed by §195, so since he later carried on a successful business, today it would be a deductible business expense |
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Term
| Harolds Club v. Commissioner |
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Definition
The Harolds Club paid Raymond Smith salaries ranging from 350-500k that were based on a contingency fee
The tax court determined that the amount paid to the father was unreasonable because of the domineering effect the father had on his sons, and therefore was not deductible as a business expense
This case is the exception, the normal scenario is set out in Pepsi on Pg 19 of the supplement |
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Term
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Definition
Rosenspan the traveling Diamond dealer without a real home
Q: could he deduct traveling expenses?
A: –three conditions must be met before a traveling expense can be deducted
• The expense must be a reasonable and necessary traveling expense, as that term is generally understood. This includes such items as transportation fares and food and lodging expenses incurred while traveling
• The expense must be incurred while “away from home”
• The expense must be incurred in pursuit of business. This means that there must be a direct connection between the expenditure and the carrying on of the trade or business of the taxpayer or of his employer. Moreover, such an expenditure must be necessary or appropriate to the development and pursuit of the business or trade
• The commission said that a home was a home in fact—there had to be duplicating expenditures to deduct the expenses away as travel expenses
o Because Rosenspan did not meet the second of these criteria in that he did not have a home to be away from, the complaint is dismissed and the disallowance of the deduction is approved |
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Term
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Definition
Andrews had two businesses and two homes that were resided in for 6 months a year
• His home has to be considered his major post of duty—It is up to the discretion of the taxpayer to determine which home is his major post of duty
o Therefore, he can deduce the expenses incurred at his minor post of duty |
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Term
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Definition
An exchange of goods or services without exchanging money
2 types
Non-taxable barter--arrangements that provide solely for the informal exchange of similar services on a noncommercial basis
taxable barter-fair market value of what is received--it has to be both realized and recognized |
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Term
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Definition
| This is the accession to wealth by way of providing services or housing to oneself |
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Term
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Definition
| Technically they are taxable |
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Term
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Definition
Taxpayer (P) had extensive investments in real estate and securities. He devoted time to overseeing these interests and hired others to assist him. He claimed the salaries and expenses for looking after these investments as deductible business expenses. The Board of Tax Appeals found that the activities did not count as a carrying on a business because the activities were for personal business regardless of the amount of time involved. The Court of Appeals affirmed.
H: The expenses are not deductible because was he was not carrying on a business. The Supreme Court found that there was not sufficient evidence to establish that Petitioner was carrying on a business. Rather, he was managing his personal portfolio. Size of a personal portfolio does not factor into considering whether or not something is a business.
R: All ordinary and necessary expenses paid or incurred during a tax year in carrying on a trade or business are deductible. |
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Term
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Definition
Moving Expenses
In order to qualify for deduction under 217, you need two things: a distant requirement and a time requirement. A moving deduction is not allowed if one’s commuting distance has not substantially increased. It’s allowed only if the distance between the taxpayer’s former residence and new principal place of work is at least 50 miles further than taxpayer’s former residence and former principal place of work. And a full time employee must be employed in the general location of his new principal place of work for at least 39 weeks of the 12 month period commencing with his arrival in the new location.
If a cohabiting married couple both work and one of them satisfies the time and distance requirement, the expense of both are deductible.
Can deduct expenses of moving household goods to new house. Includes crating and moving insurance. Includes pets. Can also deduct expense of traveling. Must be reasonable, and no deductions for meals.
Deduction may be taken only in a year in which an expense is paid.
Moving expenses are above the line deductions. Thus, any reimbursement of deductible moving expenses would result in both and inclusion in and a deduction from gross income when calculating adjusted gross income, thus resulting in a “wash” for tax reporting purposes.
For moving to foreign place, a special rule applies. You can deduct for the cost of storing items and moving such items to and from storage.
For moving, you don’t get meals. |
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Term
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Definition
F: Petitioners had a daughter who had cystic fibrosis, which made it dangerous for her to be exposed to dry and dusty air. On the doctor’s advice, Petitioner expended $1,300 for a central air unit. The central air unit also increased the value of the home by $800. Petitioners deducted the full amount of the air unit as a medical expense.
I: May the central air unit be deducted as a medical expense?
H: *the difference between the medical expense and the increase in value to the home may be deducted ($500).* The central air unit was clearly a necessary medical expense. However, the Court had to balance the general rule that a medical expense is deductible with the rule that permanent improvements to real property that increase the value of the real property are not deductible. |
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Term
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Definition
2% floor on miscellaneous itemized deductions
In the case of an individual, the miscellaneous itemized deductions for any taxable year shall be allowed only to the extent that the aggregate of such deductions exceeds 2 percent of AGI
For the purposes of this section, the term "miscellaneous itemized deductions" means the itemized deductions other than: |
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Term
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Definition
Meals or Lodging Furnished for the Convenience of the employer
(a) there shall be excluded from gross income of an employee the value of any meals or lodging furnished to him, his spouse, or any of his dependents by or on behalf of his employer for the convenience of the employer, but only if--
1) in the case of meals, the meals are furnished on the business premises of the employer, or
2) in the case of lodging, the employee is required to accept such lodging on the business premises of his employer as a condition of his employment |
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Term
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Definition
Compensation for Injuries or sickness
(a) In general
Except in the case of amounts attributable to (and not in excess of) deductions allowed under section 213 (relating to medical, etc., expenses) for any prior taxable year, gross income does not include—
(1) amounts received under workmen’s compensation acts as compensation for personal injuries or sickness;
(2) the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness;
(3) amounts received through accident or health insurance (or through an arrangement having the effect of accident or health insurance) for personal injuries or sickness (other than amounts received by an employee, to the extent such amounts
(A) are attributable to contributions by the employer which were not includible in the gross income of the employee, or
(B) are paid by the employer); |
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Term
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Definition
Amounts received under accident and health plans
Except as otherwise provided in this section, amounts received by an employee through accident or health insurance for personal injuries or sickness shall be included in gross income to the extent such amounts
(1) are attributable to contributions by the employer which were not includible in the gross income of the employee, or
(2) are paid by the employer. |
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Term
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Definition
Dependent Care assistance programs
(1) In general
Gross income of an employee does not include amounts paid or incurred by the employer for dependent care assistance provided to such employee if the assistance is furnished pursuant to a program which is described in subsection (d). |
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Term
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Definition
Group-term life insurance purchased for employees
(a) General rule
There shall be included in the gross income of an employee for the taxable year an amount equal to the cost of group-term life insurance on his life provided for part or all of such year under a policy (or policies) carried directly or indirectly by his employer (or employers); but only to the extent that such cost exceeds the sum of—
(1) the cost of $50,000 of such insurance, and
(2) the amount (if any) paid by the employee toward the purchase of such insurance. |
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Term
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Definition
Adjusted Gross income
(a) General rule
For purposes of this subtitle, the term “adjusted gross income” means, in the case of an individual, gross income minus the following deductions:
Trade and business deductions, certain trade and business deductions of employees, losses from sale or exchange of property, deductions attributable to rents and royalties, certain deductions of life tenants and income beneficiaries of property, pension, profit sharing, and annuity plans of self employed, retirement savings, etc. |
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Term
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Definition
Alimony and separate maintenance payments
(a) General rule
Gross income includes amounts received as alimony or separate maintenance payments.
(c) Payments to support children
(1) In general
Subsection (a) shall not apply to that part of any payment which the terms of the divorce or separation instrument fix (in terms of an amount of money or a part of the payment) as a sum which is payable for the support of children of the payor spouse.
(2) Treatment of certain reductions related to contingencies involving child
For purposes of paragraph (1), if any amount specified in the instrument will be reduced— |
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Term
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Definition
Annuities; certain proceeds of endowment and life insurance contracts
(a) General rules for annuities
(1) Income inclusion
Except as otherwise provided in this chapter, gross income includes any amount received as an annuity (whether for a period certain or during one or more lives) under an annuity, endowment, or life insurance contract. |
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Term
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Definition
Unemployment Compensation
(a) General rule
In the case of an individual, gross income includes unemployment compensation.
(b) Unemployment compensation defined
For purposes of this section, the term “unemployment compensation” means any amount received under a law of the United States or of a State which is in the nature of unemployment compensation.
(c) Special rule for 2009
In the case of any taxable year beginning in 2009, gross income shall not include so much of the unemployment compensation received by an individual as does not exceed $2,400. |
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Term
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Definition
Social Security and tier 1 railroad retirement benefits
(1) In general
Except as provided in paragraph (2), gross income for the taxable year of any taxpayer described in subsection (b) (notwithstanding section 207 of the Social Security Act) includes social security benefits in an amount equal to the lesser of—
(A) one-half of the social security benefits received during the taxable year, or
(B) one-half of the excess described in subsection (b)(1). |
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Term
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Definition
Interest on State and local bonds
(a) Exclusion
Except as provided in subsection (b), gross income does not include interest on any State or local bond.
(b) Exceptions
Subsection (a) shall not apply to—
(1) Private activity bond which is not a qualified bond
Any private activity bond which is not a qualified bond (within the meaning of section 141).
(2) Arbitrage bond
Any arbitrage bond (within the meaning of section 148).
(3) Bond not in registered form, etc.
Any bond unless such bond meets the applicable requirements of section 149. |
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Term
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Definition
Citizens or residents of the US living abroad
(a) Exclusion from gross income
At the election of a qualified individual (made separately with respect to paragraphs (1) and (2)), there shall be excluded from the gross income of such individual, and exempt from taxation under this subtitle, for any taxable year—
(1) the foreign earned income of such individual, and
(2) the housing cost amount of such individual. |
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Term
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Definition
Certain Death benefits
(1) General rule
Except as otherwise provided in paragraph (2), subsection (d),subsection (f), andsubsection (j), gross income does not include amounts received (whether in a single sum or otherwise) under a life insurance contract, if such amounts are paid by reason of the death of the insured. |
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Term
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Definition
Interest on education loans
(a) Allowance of deduction
In the case of an individual, there shall be allowed as a deduction for the taxable year an amount equal to the interest paid by the taxpayer during the taxable year on any qualified education loan.
(b) Maximum deduction
(1) In general
Except as provided in paragraph (2), the deduction allowed by subsection (a) for the taxable year shall not exceed the amount determined in accordance with the following table:
In the case of taxable years The dollar beginning in: amount is: 1998 $1,000 1999 $1,500 2000 $2,000 2001 or thereafter $2,500. |
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Term
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Definition
Alimony, etc., payments
(a) General rule
In the case of an individual, there shall be allowed as a deduction an amount equal to the alimony or separate maintenance payments paid during such individual’s taxable year.
(b) Alimony or separate maintenance payments defined
For purposes of this section, the term “alimony or separate maintenance payment” means any alimony or separate maintenance payment (as defined in section 71 (b)) which is includible in the gross income of the recipient under section 71.
(c) Requirement of identification number
The Secretary may prescribe regulations under which—
(1) any individual receiving alimony or separate maintenance payments is required to furnish such individual’s taxpayer identification number to the individual making such payments, and
(2) the individual making such payments is required to include such taxpayer identification number on such individual’s return for the taxable year in which such payments are made.
(d) Coordination with section 682
No deduction shall be allowed under this section with respect to any payment if, by reason of section 682 (relating to income of alimony trusts), the amount thereof is not includible in such individual’s gross income. |
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Term
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Definition
(c) Limitation on losses of individuals
In the case of an individual, the deduction under subsection (a) shall be limited to—
(1) losses incurred in a trade or business;
(2) losses incurred in any transaction entered into for profit, though not connected with a trade or business; and
(3) except as provided in subsection (h), losses of property not connected with a trade or business or a transaction entered into for profit, if such losses arise from fire, storm, shipwreck, or other casualty, or from theft. |
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Term
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Definition
Trade or Business Expenses
(c) Illegal bribes, kickbacks, and other payments
(1) Illegal payments to government officials or employees
No deduction shall be allowed under subsection (a) for any payment made, directly or indirectly, to an official or employee of any government, or of any agency or instrumentality of any government, if the payment constitutes an illegal bribe or kickback or, if the payment is to an official or employee of a foreign government, the payment is unlawful under the Foreign Corrupt Practices Act of 1977. The burden of proof in respect of the issue, for the purposes of this paragraph, as to whether a payment constitutes an illegal bribe or kickback (or is unlawful under the Foreign Corrupt Practices Act of 1977) shall be upon the Secretary to the same extent as he bears the burden of proof under section 7454 (concerning the burden of proof when the issue relates to fraud).
(2) Other illegal payments
No deduction shall be allowed under subsection (a) for any payment (other than a payment described in paragraph (1)) made, directly or indirectly, to any person, if the payment constitutes an illegal bribe, illegal kickback, or other illegal payment under any law of the United States, or under any law of a State (but only if such State law is generally enforced), which subjects the payor to a criminal penalty or the loss of license or privilege to engage in a trade or business. For purposes of this paragraph, a kickback includes a payment in consideration of the referral of a client, patient, or customer. The burden of proof in respect of the issue, for purposes of this paragraph, as to whether a payment constitutes an illegal bribe, illegal kickback, or other illegal payment shall be upon the Secretary to the same extent as he bears the burden of proof under section 7454 (concerning the burden of proof when the issue relates to fraud).
(3) Kickbacks, rebates, and bribes under medicare and medicaid
No deduction shall be allowed under subsection (a) for any kickback, rebate, or bribe made by any provider of services, supplier, physician, or other person who furnishes items or services for which payment is or may be made under the Social Security Act, or in whole or in part out of Federal funds under a State plan approved under such Act, if such kickback, rebate, or bribe is made in connection with the furnishing of such items or services or the making or receipt of such payments. For purposes of this paragraph, a kickback includes a payment in consideration of the referral of a client, patient, or customer. |
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Term
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Definition
Disallowance of certain entertainment, etc., expenses
(a) Entertainment, amusement, or recreation
(1) In general
No deduction otherwise allowable under this chapter shall be allowed for any item—
(A) Activity
With respect to an activity which is of a type generally considered to constitute entertainment, amusement, or recreation, unless the taxpayer establishes that the item was directly related to, or, in the case of an item directly preceding or following a substantial and bona fide business discussion (including business meetings at a convention or otherwise), that such item was associated with, the active conduct of the taxpayer’s trade or business, or
(B) Facility
With respect to a facility used in connection with an activity referred to in subparagraph (A).
In the case of an item described in subparagraph (A), the deduction shall in no event exceed the portion of such item which meets the requirements of subparagraph (A). |
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Term
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Definition
(m) Additional limitations on travel expenses
(1) Luxury water transportation
(A) In general
No deduction shall be allowed under this chapter for expenses incurred for transportation by water to the extent such expenses exceed twice the aggregate per diem amounts for days of such transportation. For purposes of the preceding sentence, the term “per diem amounts” means the highest amount generally allowable with respect to a day to employees of the executive branch of the Federal Government for per diem while away from home but serving in the United States.
(B) Exceptions
Subparagraph (A) shall not apply to—
(i) any expense allocable to a convention, seminar, or other meeting which is held on any cruise ship, and
(ii) any expense described in paragraph (2), (3), (4), (7), (8), or (9) of subsection (e).
(2) Travel as form of education
No deduction shall be allowed under this chapter for expenses for travel as a form of education. |
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Term
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Definition
AGI
(17) Interest on education loans
The deduction allowed by section 221. |
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Term
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Definition
AGI
(18) Higher education expenses
The deduction allowed by section 222. |
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Term
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Definition
AGI
(3) Losses from sale or exchange of property
The deductions allowed by part VI (sec. 161 and following) as losses from the sale or exchange of property. |
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Term
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Definition
AGI
(4) Deductions attributable to rents and royalties
The deductions allowed by part VI (sec. 161 and following), by section 212 (relating to expenses for production of income), and by section 611 (relating to depletion) which are attributable to property held for the production of rents or royalties. |
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Term
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Definition
AGI
(15) Moving expenses
The deduction allowed by section 217. |
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Term
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Definition
AGI
(10) Alimony
The deduction allowed by section 215. |
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Term
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Definition
Losses
(a) General rule
There shall be allowed as a deduction any loss sustained during the taxable year and not compensated for by insurance or otherwise.
(b) Amount of deduction
For purposes of subsection (a), the basis for determining the amount of the deduction for any loss shall be the adjusted basis provided in section 1011 for determining the loss from the sale or other disposition of property. |
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Term
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Definition
Expenses for production of income
In the case of an individual, there shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year—
(1) for the production or collection of income;
(2) for the management, conservation, or maintenance of property held for the production of income; or
(3) in connection with the determination, collection, or refund of any tax. |
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Term
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Definition
Reimbursement for Expenses of Moving
Except as provided in section 132 (a)(6), there shall be included in gross income (as compensation for services) any amount received or accrued, directly or indirectly, by an individual as a payment for or reimbursement of expenses of moving from one residence to another residence which is attributable to employment or self-employment. |
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Term
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Definition
Certain Fringe benefits
(g) Qualified moving expense reimbursement
For purposes of this section, the term “qualified moving expense reimbursement” means any amount received (directly or indirectly) by an individual from an employer as a payment for (or a reimbursement of) expenses which would be deductible as moving expenses under section 217 if directly paid or incurred by the individual. Such term shall not include any payment for (or reimbursement of) an expense actually deducted by the individual in a prior taxable year. |
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Term
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Definition
Medical, dental, etc., expenses
(a) Allowance of deduction
There shall be allowed as a deduction the expenses paid during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer, his spouse, or a dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof), to the extent that such expenses exceed 7.5 percent of adjusted gross income.
(b) Limitation with respect to medicine and drugs
An amount paid during the taxable year for medicine or a drug shall be taken into account under subsection (a) only if such medicine or drug is a prescribed drug or is insulin.
OMIT C (Special rule for decedents)
(d) Definitions
For purposes of this section—
(1) The term “medical care” means amounts paid—
(A) for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body,
(B) for transportation primarily for and essential to medical care referred to in subparagraph (A),
(C) for qualified long-term care services (as defined in section 7702B (c)), or
(D) for insurance (including amounts paid as premiums under part B of title XVIII of the Social Security Act, relating to supplementary medical insurance for the aged) covering medical care referred to in subparagraphs (A) and (B) or for any qualified long-term care insurance contract (as defined in section 7702B (b)). |
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Term
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Definition
Losses
(h) Treatment of casualty gains and losses
(1) $100 limitation per casualty
Any loss of an individual described in subsection (c)(3) shall be allowed only to the extent that the amount of the loss to such individual arising from each casualty, or from each theft, exceeds $500 ($100 for taxable years beginning after December 31, 2009).
(2) Net casualty loss allowed only to the extent it exceeds 10 percent of adjusted gross income
(A) In general
If the personal casualty losses for any taxable year exceed the personal casualty gains for such taxable year, such losses shall be allowed for the taxable year only to the extent of the sum of—
(i) the amount of the personal casualty gains for the taxable year, plus
(ii) so much of such excess as exceeds 10 percent of the adjusted gross income of the individual.
(B) Special rule where personal casualty gains exceed personal casualty losses
If the personal casualty gains for any taxable year exceed the personal casualty losses for such taxable year—
(i) all such gains shall be treated as gains from sales or exchanges of capital assets, and
(ii) all such losses shall be treated as losses from sales or exchanges of capital assets.
Special Rules follow |
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Term
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Definition
Charitable, etc., contributions and gifts
(a) Allowance of deduction
(1) General rule
There shall be allowed as a deduction any charitable contribution (as defined in subsection (c)) payment of which is made within the taxable year. A charitable contribution shall be allowable as a deduction only if verified under regulations prescribed by the Secretary.
(2) Corporations on accrual basis
In the case of a corporation reporting its taxable income on the accrual basis, if—
(A) the board of directors authorizes a charitable contribution during any taxable year, and
(B) payment of such contribution is made after the close of such taxable year and on or before the 15th day of the third month following the close of such taxable year,
then the taxpayer may elect to treat such contribution as paid during such taxable year. The election may be made only at the time of the filing of the return for such taxable year, and shall be signified in such manner as the Secretary shall by regulations prescribe.
(3) Future interests in tangible personal property
For purposes of this section, payment of a charitable contribution which consists of a future interest in tangible personal property shall be treated as made only when all intervening interests in, and rights to the actual possession or enjoyment of, the property have expired or are held by persons other than the taxpayer or those standing in a relationship to the taxpayer described in section 267 (b) or 707 (b). For purposes of the preceding sentence, a fixture which is intended to be severed from the real property shall be treated as tangible personal property. |
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Term
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Definition
Charitable, etc., contributions and gifts
(b) Percentage limitations
(1) Individuals
In the case of an individual, the deduction provided in subsection (a) shall be limited as provided in the succeeding subparagraphs. |
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Term
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Definition
Interest
(a) General rule
There shall be allowed as a deduction all interest paid or accrued within the taxable year on indebtedness. |
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Definition
Interest
(h) Disallowance of deduction for personal interest
(3) Qualified residence interest
For purposes of this subsection—
(A) In general
The term “qualified residence interest” means any interest which is paid or accrued during the taxable year on—
(i) acquisition indebtedness with respect to any qualified residence of the taxpayer, or
(ii) home equity indebtedness with respect to any qualified residence of the taxpayer.
For purposes of the preceding sentence, the determination of whether any property is a qualified residence of the taxpayer shall be made as of the time the interest is accrued. |
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Definition
Taxes
(a) General rule
Except as otherwise provided in this section, the following taxes shall be allowed as a deduction for the taxable year within which paid or accrued:
(1) State and local, and foreign, real property taxes.
(2) State and local personal property taxes.
(3) State and local, and foreign, income, war profits, and excess profits taxes.
(4) The GST tax imposed on income distributions.
(5) The environmental tax imposed by section 59A.
(6) Qualified motor vehicle taxes.
In addition, there shall be allowed as a deduction State and local, and foreign, taxes not described in the preceding sentence which are paid or accrued within the taxable year in carrying on a trade or business or an activity described in section 212 (relating to expenses for production of income). Notwithstanding the preceding sentence, any tax (not described in the first sentence of this subsection) which is paid or accrued by the taxpayer in connection with an acquisition or disposition of property shall be treated as part of the cost of the acquired property or, in the case of a disposition, as a reduction in the amount realized on the disposition. |
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Definition
Certain Taxes
(a) General rule
No deduction shall be allowed for the following taxes:
(1) Federal income taxes, including—
(A) the tax imposed by section 3101 (relating to the tax on employees under the Federal Insurance Contributions Act);
(B) the taxes imposed by sections 3201 and 3211 (relating to the taxes on railroad employees and railroad employee representatives); and
(C) the tax withheld at source on wages under section 3402.
(2) Federal war profits and excess profits taxes.
(3) Estate, inheritance, legacy, succession, and gift taxes.
(4) Income, war profits, and excess profits taxes imposed by the authority of any foreign country or possession of the United States if the taxpayer chooses to take to any extent the benefits of section 901.
(5) Taxes on real property, to the extent that section 164 (d) requires such taxes to be treated as imposed on another taxpayer.
(6) Taxes imposed by chapters 41, 42, 43, 44, 45, 46, and 54. |
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Definition
Interest
(d) Limitation on investment interest
(1) In general
In the case of a taxpayer other than a corporation, the amount allowed as a deduction under this chapter for investment interest for any taxable year shall not exceed the net investment income of the taxpayer for the taxable year.
(2) Carryforward of disallowed interest
The amount not allowed as a deduction for any taxable year by reason of paragraph (1) shall be treated as investment interest paid or accrued by the taxpayer in the succeeding taxable year.
(3) Investment interest
For purposes of this subsection— |
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Definition
Overall Limitation on itemized deductions
(a) General rule
In the case of an individual whose adjusted gross income exceeds the applicable amount, the amount of the itemized deductions otherwise allowable for the taxable year shall be reduced by the lesser of—
(1) 3 percent of the excess of adjusted gross income over the applicable amount, or
(2) 80 percent of the amount of the itemized deductions otherwise allowable for such taxable year.
(b) Applicable amount
(1) In general
For purposes of this section, the term “applicable amount” means $100,000 ($50,000 in the case of a separate return by a married individual within the meaning of section 7703). |
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Taxable Income Defined
(a) In general
Except as provided in subsection (b), for purposes of this subtitle, the term “taxable income” means gross income minus the deductions allowed by this chapter (other than the standard deduction).
(b) Individuals who do not itemize their deductions
In the case of an individual who does not elect to itemize his deductions for the taxable year, for purposes of this subtitle, the term “taxable income” means adjusted gross income, minus—
(1) the standard deduction, and
(2) the deduction for personal exemptions provided in section 151. |
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Definition
Taxable Income Defined
(c) Standard deduction
For purposes of this subtitle—
(1) In general
Except as otherwise provided in this subsection, the term “standard deduction” means the sum of—
(A) the basic standard deduction,
(B) the additional standard deduction,
(C) in the case of any taxable year beginning in 2008 or 2009, the real property tax deduction,
(D) the disaster loss deduction, and
(E) the motor vehicle sales tax deduction. |
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Definition
Taxable Income Defined
(f) Aged or blind additional amounts
(1) Additional amounts for the aged
The taxpayer shall be entitled to an additional amount of $600—
(A) for himself if he has attained age 65 before the close of his taxable year, and
(B) for the spouse of the taxpayer if the spouse has attained age 65 before the close of the taxable year and an additional exemption is allowable to the taxpayer for such spouse under section 151 (b).
(2) Additional amount for blind
The taxpayer shall be entitled to an additional amount of $600—
(A) for himself if he is blind at the close of the taxable year, and
(B) for the spouse of the taxpayer if the spouse is blind as of the close of the taxable year and an additional exemption is allowable to the taxpayer for such spouse under section 151 (b).
For purposes of subparagraph (B), if the spouse dies during the taxable year the determination of whether such spouse is blind shall be made as of the time of such death. |
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Definition
Taxable Income Defined
(g) Marital status
For purposes of this section, marital status shall be determined under section 7703. |
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Definition
Determination of Marital Status
(a) General rule
For purposes of part V of subchapter B of chapter 1 and those provisions of this title which refer to this subsection—
(1) the determination of whether an individual is married shall be made as of the close of his taxable year; except that if his spouse dies during his taxable year such determination shall be made as of the time of such death; and
(2) an individual legally separated from his spouse under a decree of divorce or of separate maintenance shall not be considered as married.
(b) Certain married individuals living apart
For purposes of those provisions of this title which refer to this subsection, if—
(1) an individual who is married (within the meaning of subsection (a)) and who files a separate return maintains as his home a household which constitutes for more than one-half of the taxable year the principal place of abode of a child (within the meaning of section 152 (f)(1)) with respect to whom such individual is entitled to a deduction for the taxable year under section 151 (or would be so entitled but for section 152 (e)),
(2) such individual furnishes over one-half of the cost of maintaining such household during the taxable year, and
(3) during the last 6 months of the taxable year, such individual’s spouse is not a member of such household,
such individual shall not be considered as married. |
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Definition
Allowance of Deductions for Personal Exemptions
151(d)-- Except as otherwise provided, the term exemption amount means $2,000
151(c) --an exemption of the exemption amount for each individual who is a dependent (as defined by §152) of teh taxpayer for the taxable year. |
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Definition
Gifts and Inheritances
(a) Gross Income does not include the value of property acquired by gift, bequest, devise, or inheritance
Employee Gift--102(c) |
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Definition
Prizes and Awards
(a) Except as otherwise provided in this section or in section 117 (qualified scholarships), gross income includes amounts received as prizes and awards |
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Definition
Trust Income, Deductions, And Credits Attributable to Grantors and Others as substantial owners
Trust provisions-->Subpart E |
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Definition
Revisionary Interests
(a) The grantor shall be trated as the owner of any portion of a trust in which he has a reversionary interest in either the corpus or the income therefrom, if, as of the inception of that portion of the trust, the value of such interest exceeds 5 percent of the value of such portion |
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Term
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Definition
Power to Control Beneficial Enjoyment
(a) The grantor shall be treated as the owner of any portion of a trust in respect of which the beneficial enjoyment of the corpus or the income therefrom is subject to a power of disposition, exercisable by the grantor or a non adverse party, or both, without the approval or consent of any adverse party |
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Definition
Administrative Powers
The grantor shall be treated as the owner of any portion of a trust in respect of which--
1) Power to deal for less than adequate and full consideration
2) Power to borrow without adequate interest or security
3) Borrowing of the trust funds
4) General powers of administration |
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Definition
Power to Revoke
(a) The grantor shall be treated as the owner of any portion of a trust whether or not he is treated as such owner under any other provision of this part, where at any time the power to revest in the grantor title to such portion is exercisable by the grantor or a non adverse party, or both |
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Definition
Income for Benefit of Grantor
(a) the grantor shall be treated as the owner of any portion of a trust whether or not he is treated as such owner under section 674, whose income without the approval or consent of any adverse party is, or, in the discretion of the grantor or a nonadverse party, or both, may be--
(1) distributed by the grantor or grantor's spouse
(2) held or accumulated for future distribution to the grantor or the grantor's spouse OR
(3) Applied to the payment of premiums on policies of insurance on the life of the grantor or the grantor's spouse |
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Term
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Definition
Person other than Grantor Treated as substantial Owner
A person other than the grantor shall be treated as the owner of any portion of a trust with respect to which
(1) such person has a power exercisable solely by himself to vest the corpus or income therefrom in himself, or
(2) such person has previously partially released or otherwise modified such a power and after the release or modification retains such control as would, within the principles of sections 671-77, inclusive, subject a grantor of a trust to treatment as the owner thereof |
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Definition
Recipients of Income in Respect of Decedents
(a) Inclusion in Gross Income
(1) General rule--The amount of all items of gross income in respect of a decedent which are not properly includible in respect of the taxable period in which falls the date of his death or a prior period (including the amount of all items of gross income in respect of a prior decedent, if the right to receive such amount was acquired by reason of the death of the prior decedent or by bequest, devise, or inheritance from the prior decedent) shall be included in the gross income, for the taxable year when received, of:
(A) the estate of the decedent, if the right to receive the amount is acquired by the decedent’s estate from the decedent;
(B) the person who, by reason of the death of the decedent, acquires the right to receive the amount, if the right to receive the amount is not acquired by the decedent’s estate from the decedent; or
(C) the person who acquires from the decedent the right to receive the amount by bequest, devise, or inheritance, if the amount is received after a distribution by the decedent’s estate of such right. |
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Definition
Kiddie Tax
The tax imposed by this section shall be equal to the greater of--
(A) the tax imposed by this section without regard to this subsection, or
(B) the sum of--
(i) the tax which would be imposed by this section if the taxable income of such child for the taxable year were reduced by the net unearned income of such child, plus
(ii) such child's share of allocable parental tax |
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Definition
Transfers of Property between spouses or incident to Divorce
(a)--General Rule- No gain or loss shall be recognized on a transfer of property from an individual to (1) a spouse, or (2) a former spouse, but only if the transfer is incident to the divorce |
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