12.

Nov 14

1
• Homework review
• Ch. 5 homework questions 1, 2, 4, 6, 14, 27, 28 (a,b); 30 (a through d); 33 (a and b).
• Review SHANKAR V. COMM’R. case

• Materials
• Chapter 5: Gross Income – Exclusions
• Review framework (pg. 5-2)
• Focus on exclusions that Congress has authorized – statutory authority (pg. 5-2); always consider reasons
• Gifts and inheritance (pg. 5-3)
• Employer payments to employees (pg. 5-3); employee death benefits (pg. 5-4)
• Life insurance proceeds (pgs. 5-4)
• Scholarships (pg. 5-7)
• Compensation for injuries and sickness (pg. 5-8); see concept summary (pg. 5-9)
• Wrongful incarceration (pg. 5-10); worker’s compensation (pg. 5-10); accident and health insurance benefits (pg. 5-10)
• Meals and lodging (pg. 5-13)
• Employee fringe benefits (pg. 5-14, etc.); especially see pg. 5-17.
• Education savings programs (e.g., 529 plan; pg. 5-26)
• Income from discharge of indebtedness (pg. 5-29)
• Tax benefit rule (pg. 5-27)

• In-class assignment:
• Summarize Edwards Collins case
2
 ent
ts
TAX FORMULA FOR INDIVIDUALS

ym
ou n
s:

ns

plo
on

Acc
ed s of

loa

ons

pai -em
ucti

ing
ent
AT mple

uti

tax l self
Sav

trib
tud

d
Ld

ra
Exa

alth
ns

con

ede
to

He

IRA
[Pg. 3-3]

yF
s
ere

s to

f an
tain
[Pg. 3-4]

Int

on

to
Cer
uti
Above the “LINE” deductions [Pg. 3-5]

Par
trib
The “LINE”

Con
[Pg. 3-6] ATL deductions generally represent costs incurred to
Below the “LINE”, deductions from AGI earn income, and may directly affect the amount of
[Pg. 3-7]
itemized deductions)

AGI is an important subtotal that is the basis for

computing percentage limitation on certain itemized
deductions
• E.g., medical expenses are deductible only to the
extent they exceed 7.5% of AGI (“7.5% floor”)
• E.g., deductions for gifts to public charities may
not exceed 60% of AGI (“60% ceiling”)
0
$10 ax

CHECK IN BOOK FOR 2020 INFO

,00
.5%

M
s:
on

of 7
cti

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)

1. Married filing separately,

GI cess

ons
du

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- Blind
tax

where either spouse itemizes

de

itati
of A ex
ite mple

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age s
rop axe les
n

ent tion
lim
e
ns)
i

al p te t r sa

lim gag

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es,

xes

% o sse
atio

erc ibu
mi
Exa

GI

Limitations on standard
er t s
ens

son esta e o

ain ort

f 10 ft lo
y ta

d p ontr
t

deduction for persons who can

Per Real incom

i
er t e m
xp

ss o the
al e

be claimed as dependents
c
m

pec itable

xce nd
ct t on ho
dic

•
l

Limited to greater of $1,100

a

in e alty a
loc
Me

ifie

or [sum of “earned income” +

oc

r
thi Cha
nd

(su erest

$350]
u
te a

Cas

•
ns

Cannot exceed Standard ded.

bje
Int
Sta

• 65 y/o and/or blind dep. ASD

(wi

Feb. 2019