Table of Contents
An Introductory Note to Students xiii
Acknowledgments xv
Chapter 1 Introduction 1
A Introduction to Terminology and Structure 2
B Time Value of Money and the Value of Deferring Tax 11
C Alternative Tax Bases: Consumption Tax and Value Added Tax 18
D Tax Administration and Litigation 24
E Tax Legislation 30
F Tax Research 32
Chapter 2 Some Characteristics of Gross Income 37
A The Haig-Simons Definition of Income 37
B Noncash Compensation: Fringe Benefits 39
1 Employer-Provided Meals and Lodging 39
2 Employer-Provided Insurance and Health, Accident, and Death Benefits 46
3 The Section 132 Exclusion for Miscellaneous Fringe Benefits 50
C Imputed Income 65
D Windfalls, Gifts, Scholarships, Prizes, and Transfer Payments 68
1 Windfalls 68
1 Gifts and Bequests 69
3 Scholarships, Prizes, and Awards 76
4 Transfer Payments 78
E Selected Recovery of Capital Issues: Partial Sales, Annuities, Insurance Policies, Life Estates, and Remainder Interests 79
1 Partial Sales 80
2 Annuities 82
3 Life Insurance 89
4 Gambling Winnings and Losses 92
5 Life Estates and Remainder Interests 96
F Annual Accounting 98
G Personal Injury Recoveries 103
H Transactions Involving Loans and Income from Discharge of Indebtedness 112
I Tax-Exempt Bonds 123
J Gain from the Sale of a Personal Residence 124
Chapter 3 Problems of Timing 117
A Gains and Losses from Investment in Property 128
1 Realization of Gains and Losses 128
2 Recognition of Gains and Losses 129
a Like-Kind Exchanges 130
b Other Nonrecognition Rules 144
B Transfers Incident to Marriage and Divorce 146
C Installment Sale and Open Transaction Reporting 155
D Original Issue Discount 160
E The Cash Method of Accounting 167
F Section 83 Transfers 175
G The Accrual Method of Accounting 184
Chapter 4 Personal Deductions, Exemptions, and Credits 191
A Introduction 191
B Casualty Losses 199
C Extraordinary Medical Expenses 208
D Charitable Contributions 218
E Personal Interest 232
F Taxes 238
Chapter 4 Deductions for the Costs of Earning Income 243
A The Statutory Framework 244
B Current Expenses versus Capital Expenditures 246
C Repair and Maintenance Expenses 257
D Inventory Accounting 264
E Rent Payments versus Installment Purchase 274
F Goodwill and Other Intangible Assets 278
G "Ordinary and Necessary" Expenses 282
1 The Scope of "Ordinary and Necessary" 282
2 Reasonable Compensation 284
3 Costs Associated with Illegal or Unethical Activities 286
H Depreciation and the Accelerated Cost Recovery System 288
I Depletion Deductions 306
J Tax Shelters 308
1 The Characteristics of Tax Shelters 308
2 The Judicial Response to Tax Shelters 310
3 The Congressional Response to Tax Shelters 317
a The Investment Interest Limitation of § 163(d) 318
b The Passive Loss Rules of §469 321
c The At-Risk Rules of §465 332
d The Limitations of §§264 and 265 341
4 Sale and Leaseback Transactions 344
5 Corporate and Individual Tax Shelters of the 1990s 348
K Alternative Minimum Tax 352
Chapter 6 Mixed Personal and Business Expenditures 355
A Controlling the Abuse of Business Deductions 356
1 Hobby Losses 356
2 Rental of a Dwelling Used by the Taxpayer 362
3 Home Offices, Computers, and Automobiles 369
B Travel and Entertainment Expenses 376
C Child Care Expenses 385
D Commuting Expenses 389
E Clothing Expenses 392
F Legal Expenses 395
G Educational Expenses 397
Chapter 7 Income Shifting 411
A Income from Services and Property 411
B Same-Sex Couples, Joint Return Filing, and the Relationship between State Law and Federal Tax Law 422
C Trusts 426
D Grantor Trusts 430
E Family Partnerships 435
F Below-Market Loans 438
Chapter 8 Capital Gains and Losses 443
A The Tax Treatment of Capital Gains and Losses 443
B Policy Rationale for the Treatment of Capital Gain and Loss 452
C The Definition of "Capital Asset" 454
D Section 1231 and Depreciation Recapture 466
E Substitutes for Ordinary Income 472
F The Tax on Net Investment Income 478
G The Sale of a Business 482
H Connected Current and Prior Transactions 486
Appendix: Sample Examinations 487
Table of Cases 571
Table of Internal Revenue Code Sections 575
Table of Treasury Regulations 587
Table of Other Administrative Pronouncements 591
Topical Index 593
