9.

October 24th

1
• Review midterm exam

• Miscellaneous discussion – overview of remaining course materials and big picture

• Chapter 4: Gross Income – Concepts and Inclusions
• What is income?
• Gross income is broadly defined (pg. 4-3)
• Recovery of capital doctrine (pg. 4-3)
• Items specifically included in gross income (pg.4-19): alimony; prizes/awards (pg 4-27); unemployment comp; etc.
• When is the income recognized?
• Does not require receipt of cash/ cash receipts taxpayer v. accrual (pg. 4-7)
• Constructive receipt doctrine (pg. 4-9)
• To whom is the income taxable?
• Sources of income – personal services; income from property (tree vs. fruit) (pg. 4-13); income from entities (4-16)
• Chapter 5: Gross Income – Exclusions
• Gifts and inheritance (pg. 5-3)
• Life insurance proceeds (pg. 5-4)
• Scholarships (pg. 5-7)
• Compensation for injuries and sickness (pg. 5-5)
• Employer health plans (pg. 5-11); meals and lodging (pg. 5-13); employee fringe benefits (pg. 5-14); etc.
2
• Review midterm exam

• Miscellaneous discussion – overview of remaining course materials and big picture

• Chapter 6: Deductions and Losses – In general
• Deductions for agi vs. from agi (pg. 6-2)
• Authority for deductions and criteria (pg. 6-3, etc.)
• Timing (pg. 6-9, etc.)
• Disallowance possibilities (pg. 6-13, etc.)

• Chapter 7: Deductions and Losses – Certain Business Expenses and Losses

• Bad debts - business vs. nonbusiness (pg. 7-4)
• Loans between related parties (pg. 7-5)
• Worthless securities and small business stock losses (pg. 7-6)
• Losses of individuals (pg. 7-7)
• NOLs (pg. 7-19)

3
• Review midterm exam

• Miscellaneous discussion – overview of remaining course materials and big picture

• Chapter 8: Depreciation, Cost Recovery, Amortization and Depletion
• Generally (pg. 8-2, etc.)
• Chapter 10: Deductions and Losses: Certain Itemize Deductions
• Medical expenses (pg. 10-3); property taxes (pg. 10-11); interest (pg. 10-14); charitable contributions (pg. 10-18); etc.
• Chapter 12: Tax Credits and Payments
• Generally (pg. 12-3, etc.)
• Chapter 13: Property Transactions: Determination of Gain or Loss, Basis Considerations, and
Nontaxable Exchanges
• Generally (pg. 13-3, etc.)
• Chapter 14: Property Transactions: Capital Gains and Losses, etc.
• Generally (pg. 14-3, etc.)

4
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AGI is an important subtotal that is the basis for

computing percentage limitation on certain itemized
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extent they exceed 7.5% of AGI (“7.5% floor”)
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Feb. 2019
Gains and losses from property transactions

Question 1: Has gain or loss been realized?

Question 2: Should the realized amount be recognized?
Question 3: If the amount should be recognized, is the gain or loss CAPITAL or ORDINARY?

 All realized gains are recognized (taxable) unless some specific part of the tax law provides otherwise (e.g., certain nontaxable exchanges like §351).

 Realized losses may or may not be recognized (deductible) for tax purposes.
• Generally, losses realized from the disposition of personal use property (e.g., a resident, home furnishings, clothing) are not recognized. [p3-29, ex.43]

 Once it has been determined that the disposition of property results in a recognized gain or loss, the next step is to
classify the gain or loss as CAPITAL or ORDINARY.
• Although ordinary gain is fully taxable and ordinary loss is fully deductible, the same may not hold true for capital gains and capital losses.