Tax Note

Gross Income

-What is taxable income?

1.There must be economic benefit

2.The income must be realized (value change+ transaction done)

3.The income must be recognized.

-Gross income defined (not all-inclusive)

1.compensation.包括fees, commissions, fringe benefits

2.Gross income derived from business/Distributive share of partnership gross income

3.Gains derived from dealings in property

4.Interest

5.Rents

6.Royalties

7.Dividends

8.Alimony and separate maintenance payments

9.Annuities/Pensions

10.Income from life insurance and endowment contracts捐赠合同

11.Income from discharge of indebtedness

12.Income in respect of a decedent死者收入

13. Income from an interest in an estate or trust

(不一定是现金形式，也可以是service或property。如果是indirect benefits的话，如果这个benefit是为了business needs的，则可以被exclude)

-To whom is income taxable?

  Allocating income between married:

1.Under common law, joint income is income from jointly owned property.

2.Under community income is considered to belong equally to the spouses

3.earnings of a minor child are taxed to child regardless of the state’s property law system

-Three accounting methods

1.cash method:当年收钱当年交税/一定要是constructive receipt，就是可以随时支取而没有限制，e.g A check received after banking hours/Interest credited to a bank savings account等，都需要report income

2.Accrual Method: report income in the year it is earned.有一个例外就是prepaid income，无论cash还是accrual都要在收到的当年或者第二年收税。

3.Hybrid Method: combination of the cash and accrual methods

有关买卖的用accrual method，其他收入用cash method，通常由一些small businesses that maintain inventories使用。

-Items of Gross Income(Sec.61 用Form 1040)

1.Compensation:salaries, wages, fees, commissions, tips, bonuses, specialized forms of compensation

Exclusion:

*有一些fringe benefits: group term life insurance premiums, health and accident insurance premiums, employee discounts, contributions to retirement plans and education benefits

*foreign-earned income

2.Business income:

如果是provide service，则gross business income is total amount received.

如果是非服务业，gross business income is total sales less the cost of goods sold= gross profit

3. Gain from dealings in property

*sales price-the cost of property

*loss不能直接offset gross income，而是deduction for AGI, 而且一年所减上限3000刀