Internal Revenue Code section 61

Internal Revenue Code section 61

Section 61 of the Internal Revenue Code (IRC 61, usc|26|61) defines "gross income," the starting point for determining which items of income are taxable for federal income tax purposes in the United States. Section 61 states that "except as otherwise provided in this subtitle gross income means all income from whatever source derived". The United States Supreme Court has interpreted this to mean that Congress intended to express its full power to tax incomes to the extent that such taxation is permitted under Article I, Section 8, Clause 1 (the Taxing and Spending Clause) of the Constitution of the United States and under the Constitution's Sixteenth Amendment. [Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955)]

cope

Section 61 contains a rare example of "intensive redundancy", or "emphatic redundancy", in the Internal Revenue Code. That is, the parenthetical phrase "but not limited to" redundantly intensifies the significance of the phrase "all income" and the phrase "from whatever source derived." Under ordinary rules of statutory construction the list of fifteen specific items of income would not, even in the absence of the parenthetical intensive, be considered a complete list of all items of income included in "gross income" under the definition. The use of the word "including" also highlights this expansive definition of "gross income." Under Internal Revenue Code UnitedStatesCodeSec|26|7701(c), " [t] he terms 'includes' and 'including' when used in a definition contained in this title shall not be deemed to exclude other things otherwise within the meaning of the term defined." Under the 1959 U.S. Supreme Court case of "Sims v. United States", the terms "includes" and "including" in section 7701 are terms of expansion, not terms of exclusivity. [359 U.S. 108, 79 S. Ct. 641, 59-1 U.S. Tax Cas. (CCH) paragr. 9338 (1959).]

The phrase "except as otherwise provided in this subtitle" generally refers to the items of income that are excluded from "gross income" under Internal Revenue Code sections 101 through 140. For example, UnitedStatesCodeSec|26|101 excludes certain life insurance proceeds received by reason of the death of the insured. UnitedStatesCodeSec|26|102 excludes certain gifts and inheritances. UnitedStatesCodeSec|26|103 excludes interest income on state and municipal bonds. UnitedStatesCodeSec|26|104 excludes certain amounts received on account of injuries or sickness.

Types of § 61 income

To avoid any doubt, section 61 lists examples of sources of income that are taxable under the Code, including "Compensation for services, including fees, commissions, fringe benefits, and similar items"; "Gross income derived from business"; and "Gains derived from dealings in property". Other examples of income listed in section 61 include interest and dividends, rent, royalty payments, alimony payments; life insurance, pensions, and inheritances.

Compensation for services

Income from Compensation for services include fees, commissions, fringe benefits, and similar items. The employer may also compensate the employee-taxpayer indirectly.

A taxpayer may receive taxable income from the taxpayer's employer when the employer pays the taxpayer's taxes. In 1929, the United States Supreme Court decided the case of "Old Colony Trust Co. v. Commissioner". [279 U.S. 716 (1929)] The employer paid incomes taxes on behalf of an employee, and the Court questioned whether that payment constituted additional taxable income to the employee. The Court decided that the payment constituted income to the employee because “the discharge by a third person of an obligation to him is equivalent to receipt by the person taxed.” Thus, even when a taxpayer does not directly receive compensation for services, the compensation may be considered gross income if the payment releases the taxpayer from an obligation.

The issue of whether indirect payments for services should be included in gross income arose again in "McCann v. United States". [81-2 U.S. Tax Cas. (CCH) para. 9689 (Ct. Cl. 1981), "aff'd", 696 F.2d 1386, 83-1 U.S. Tax Cas. (CCH) paragr. 9153 (Fed. Cir. 1983).] In "McCann", the court had to decide whether travel expenses paid by an employer to enable an employee to attend a company conference were part of the employee’s gross income. The company provided the travel award to the employee for good work in increasing net sales during 1972. The court held that the travel expenses were compensation to the employee for services rendered to the company during 1972 and should be included in gross income. Therefore, when a company pays travel expenses, a taxpayer must include such compensation in gross income when the excursion is viewed as a reward for outstanding employee success within the company.

Similar to "McCann", the issue in "United States v. Gotcher" [401 F.2d 118] involved an expense-paid trip. The employer paid for the employee to travel to Germany to induce the employee to undertake further business endeavors. The court held that the employee’s expenses paid by the employer were not gross income because the “indirect economic gain [to the employee was] subordinate to an overall business purpose.” However, the court found that the employee’s wife, who accompanied her husband on the trip, incurred gross income because the wife’s trip was primarily a vacation. As such, a taxpayer does not acquire gross income from an expense-paid trip provided by the employer when the primary and overall purpose relates to business interests.

Business income

Gross income derived from business

Discharge from indebtedness

One form of income listed in the Code, that of "discharge of indebtedness" is not often considered income by lay persons. If, however, a taxpayer owes a debt to any other party, and that debt is forgiven without being fully repaid, the taxpayer must as a general rule declare the forgiven amount as income, and must pay tax on it. [This provision does not apply to debts where the amount is unsettled, or to certain debts in bankruptcy, insolvency and certain other limited situations. For example, suppose John claims to be owed $1,000 by Bill, based on a personal injury suffered by John that was caused by Bill. Suppose also that Bill insists that he owes John only $500. If they agree to settle the dispute for $700, Bill (the taxpayer) has not been relieved of any debt that was clearly owed.]

Passive income

capital gain, interest and dividends, royalty payments

Other

life insurance, alimony payments, pensions, and inheritances, rent

ee also

*Internal Revenue Service
*Taxation in the United States
*Zarin v. Commissioner

Notes

External links

*usc|26|61, Cornell Law School


Wikimedia Foundation. 2010.

Игры ⚽ Поможем решить контрольную работу

Look at other dictionaries:

  • Internal Revenue Code Section 132(a) — provides eight types of fringe benefits that are excluded from gross income. These include fringe benefits which qualify as a (1) no additional cost service, (2) qualified employee discount, (3) working condition fringe, (4) de minimis fringe,… …   Wikipedia

  • Internal Revenue Code section 1 — Section 1 of the Internal Revenue Code (usc|26|1 or simply IRC §1), titled Tax Imposed is the law that imposes a federal income tax on taxable income, and sets forth the amount of the tax to be paid. A similar tax on corporations is set forth in… …   Wikipedia

  • Internal Revenue Code section 212 — Internal Revenue Code § 212 provides a deduction, for U.S. federal income tax purposes, for expenses incurred in investment activities. Taxpayers are allowed to deduct “all in the ordinary and necessary expenses paid or incurred during the… …   Wikipedia

  • Internal Revenue Code section 409A — Section 409A of the United States Internal Revenue Code regulates the tax treatment of the “nonqualified deferred compensation,” whether paid to executives or any other employees. History Section 409A was added to the Internal Revenue Code,… …   Wikipedia

  • Internal Revenue Code section 861 — Internal Revenue Code 861, usc|26|861, titled Income from sources within the United States is a provision of the Internal Revenue Code which lists The following items of gross income shall be treated as income from sources within the United… …   Wikipedia

  • Internal Revenue Code section 355 — Section 355 of the Internal Revenue Code (IRC § 355) allows a corporation to make a tax free distribution to its shareholders of stock and securities in one or more controlled subsidiaries. If a set of statutory and judicial requirements are met …   Wikipedia

  • Internal Revenue Code Section 162(a) — Section 162(a) is a provision of the Internal Revenue Code, a United States taxation law. It concerns deductions for business expenses. [http://www.fourmilab.ch/ustax/www/t26 A 1 B VI 162.html] It is one of the most important provisions in the… …   Wikipedia

  • Internal Revenue Code Section 1041 — Section 1041 of the Internal Revenue Code (26 U.S.C. § 1041) [usc|26|1041.] addresses transfers of property between spouses or incident to divorce. General Rule The general rule in § 1041(a) is that no gain or loss shall be recognized on a… …   Wikipedia

  • Internal Revenue Code section 183 — Section 183 of the United States Internal Revenue Code (usc|26|183), sometimes referred to as the hobby loss rule , limits the losses that can be deducted from income which are attributable to hobbies and other not for profit activities.… …   Wikipedia

  • Internal Revenue Code section 1031 — Under Section 1031 of the Internal Revenue Code (usc|26|1031), the exchange of certain types of property may defer the recognition of capital gains or losses due upon sale, and hence defer any capital gains taxes otherwise due.ummaryTo qualify… …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”