Chapters 28 and 29. Tax Accounting Methods. Basic Principles. Taxable Year - period for which taxable income is computed calendar year fiscal year 52- 53-week year short year (if less than 12 months). Basic Principles (continued). Short Taxable Periods §443(a)
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Tax Accounting Methods
The Meaning of “Income” - Basic Definitional Concepts
§ 61(a) - “gross income” - “all income from whatever source derived including (but not limited to) the following items:…”
Eisner v. Macomber – “gain derived from capital, from labor, or from both combined…”
aside from its direct impact on the taxability of stock dividends, three corollaries have important implications regarding definition of “income”
CIR v. Glenshaw Glass Co.
“…gains or profits and income derived from any source whatever.”
Economic income - increase in taxpayer’s net worth
Rule of administrative convenience and legislative generosity
Any action that significantly alters the taxpayer’s relationship to an asset
§ 104(a) - excludes the amount of any damages (other than punitive damages)…received…on account of personal physical injuries or physical sickness.”
“both a rule of inclusion and exclusion: recovery of an item previously deducted must be included in income; that portion of the recovery not resulting in a prior tax benefit is excluded.”
Inclusion of Recovered Items
Exclusion of Items Deducted Without Tax Benefit