tax case ratios

8/3/2019 Tax Case Ratios

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CASE RATIOS

DEFINITION OF INCOME

1) Commissioner v Glenshaw Glass Income is anything that undeniably increases the wealth of a person. Clearly realized Over which the taxpayer has complete dominion over

EMPLOYER PROVIDED MEALS AND LODGING: THE CONVENIENCE OF THE EMPLOYER

DOCTRINENOW CODIFIED AS S.119

2) Bengalia v Commissioner (1937) Meals and lodging would not be considered compensation (and thus it is excluded from gross

income) if they were provided for the benefit of the employer in order for the employee to

properly do his job.

S.119 Codified3)

Commissioner v Kowalski (1955)

The Court found that money is not food, and a plain language reading of119 does not includecash paid for meals, only for the meals themselves.

In general, the Tax Code has been read to state that everything is includable as gross incomeunder 26 U.S.C. 61(a) unless it is explicitly excluded.

The word furnished means the food or lodging must be provided directly to the employee ratherthan a cash allowance which the employee uses to purchase the relevant items

This is an interpretation of the first clause of s.119(a)GRATUITOUS TRANSFERS: WINDFALLS, PRIZES AND GIFTS

4) Cesarini v United States Income from all sources is taxed unless the taxpayer can point to an express exemption. Treasure troves are taxable

5) TURNER V COMMISSIONER The prize of tickets to Brazil should be included as income, the amount was determined but they

didn't use the retail value or the value reported by Turner of $520. They found the value was

$1400.00the value of the tickets to the Turners rather than their nominal face value

6) WADE V COMMISSIONER The trips were purchased by the stations at a cost significantly below what their retail value was

if they had been purchased individually. In this case the best measure of the fair market value of the award is the allocable pro rata

portion of the television stations' total direct cost.

GIFTS AND SECTION 102

7) COMMISSIONER V DUBERSTEIN (STANTON) The basic rule illustrated in this case is that in order to be considered a gift, the item must be

given with no expectation of getting something in return, or in response to receiving something

of value.


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Intention of the Donee is Important in determining if it is a gift or noto Gifts are the result of "detached and disinterested generosity", while payments are given

as an "involved and intensely interested" act.

o In other words, it is the intention of the transferor that is controlling as to whether atransfer is a gift.

That's a question of fact for a jury to decide.8) UNITED STATES V KAISER

Assistance by Union was gift because nothing was expected in return.9) LYETH V HOEY

The Court found that Lyeth didn't get the money through the will, but he wasn't just somerandom guy, he was grandma's heir, and so any money he received, regardless of how he

received it, counts as an inheritance.

"What he got from the estate came to him because he was an heir."DAMAGES FOR PERSONAL INJURY

10)GRUNFEDER V HECKLER The payments received by Grunfeder should not count in determining her eligibility for SSI

payments.

DISCHARGE OF INDEBTEDNESS

11)ZARIN V COMMISSIONER Discharge of gambling debt is not income because debt was still contested. Finally agreed-upon

value is considered original debt value, thus no net gain to income.

o Reg. 1.61-12(a).12)ROOD V COMMISSIONER

Did not satisfactorily prove the dispute therefore the discharge of indebtedness is income

TIMING: RETURN OF CAPITAL

13)CLARK V COMMISSIONER Compensation due to a lawyer error is not taxable in this caseClarks position before obtaining

the money and after obtaining the money was the same.

14)REINKE V COMMISSIONER Money given was lease payments which are taxable as ordinary incomethe easement is not a

temporary right to use the land of anotherit is a conveyance of an interest in propertyno

easement here, therefore leasetherefore compensation

15)INAJA LAND CO V COMMISSIONER It was an easementtherefore compensation for damagesbut will be taxed on the capital gain

if property is sold

TIMING II: REALIZATION, RECOGNIZATION AND THE PROBLEM OF DEFFERED

COMPENSATION - GAINS

16)BURNET V LOGAN


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Profit is not required to be reported until it is actually realizeduntil the basis is recoveredifthere is uncertainty as to number of years and amount.

17)HELVERING V BRUUN bldg constr by tenant or improvement to property is income to lessor at end of leasees term or

tenant abandons, whichever comes first.

Overruled by s.10918)JAMES V UNITED STATES

All gains, even unlawful ones, are considered income for taxes purposesTIMING II: REALIZATION, RECOGNIZATION AND THE PROBLEM OF DEFFERED

COMPENSATIONLOSSNEEDS TO BE CLEARLY REALIZED

19)CORRA RESOURCES Requires an action that irrevocably cuts ties t the asset such as a repudiation of the lease,

abandonment of the property or the equivalent for deduction to be applicable

20)COTTAGE SAVINGS A financial institution can recognize losses when it exchanges its interests in one group of

residential mortgage loans for another lenders interests in a different group of residentialmortgage loans

TIMING IIISTOCK OPTIONS AND RESTRICTIVE PROPERTYWHEN EMPLOYER

PROVIDES YOU WITH STOCK TO MAKE YOU STAY IN COMPANY

21)LOBUE V COMMISSIONER When assets are transferred by an employer to an employee to secure better services they are

plainly compensation. It makes no difference that the compensation is paid in stocks rather than

in money.

LIKE-KIND EXCHANGESNO RECOGNITION OF LOSS OR GAINUNLESS THERE IS CASH

OR OTHER STUFF THROWN IN TO EVEN OUT THE EXCHANGE!

DEDUCTIONS I: TRADE OR BUSINESS DEDUCTIONS - ENTERTAINMENT

22)MOSS V COMMISSIONER Daily law partner lunch at expensive restaurant not deductible

23)COHAN V COMMISSIONER (DECIDED PRIOR TO S.274 ADDN) If a taxpayer establishes than an expense is deductible but is unable to substantiate the precise

amount, the Court may estimate the amount, bearing heavily against the taxpayer whose

inexactitude is of his own making.THIS WAS ABOLISHED IN THE REVENUE ACT OF1962

24)PALO ALTO V COMMISSIONER An ordinary expense is one that is normally to be expected, in view of the circumstances

facing the business, and a necessary expense is one that is appropriate and helpful to the

businesshaving plane on standby was an ordinary and necessary expense


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DEDUCTION II: INCREASED PERSONAL EXPENDITURES RESULTING FROM BUSINESS

EMPLOYMENT: THE DISTINCTION BETWEEN HOME AND OFFICE AND THE

RELEVANCE OF SOCIAL CHANGE

COMMUTING AND AWAY FROM HOME EXPENSES

25)COMMISSIONER V FLOWERS If TPs decision to stay in one place instead of relocating and thus incurs expenses, not

deductible.

Your tax home is your principle place of business unless you do not have a permanent place ofbusiness

TEMPORARY EMPLOYMENT SITUATIONS

26)ANDREWS V COMMISSIONER The basic idea behind 162(a)(2) is that if a person has to duplicate their living expenses

because of business, they are entitled to deduct the cost of the second set of living expenses.

27)YEATES V COMMISSIONERTEMPORARY EMPLOYMENT Employment is considered indefinite if the job prospects in the new location are likely to result

in a substantial amount of time, whereas employment is temporary of its termination could be

reasonably foreseen within a short time

Yeates employment is indefinite rather than temporary based on his seniority in the companythe tax court reasonably found that his prospects for continued employment there were good .

HOME OFFICE AND SECTION 280(A)

28)COMMISSIONER V SOLIMAN

Soliman test: two-part test: (1.) relative importance and (2.) time spent1. Relative importance of the placea. Place where the most important functions are performed.b. For goods or services, great weight given to point of delivery.

2. Amount of time:a. Compare amount of time spent at home w/ time spent at other places where business

activities occur.

29)POPOV V COMMSSIONER A professional musician is entitled to deduct the expenses from the portion of her home used

exclusively for musical practice

The relative importance test is not decisive therefore the amount of time spent test is used.30)WEISSMAN V COMMISSIONER

Allowed a home office deduction ot a professor who claimed to spend 8-% of his time at homea 10 room apartment of which two rooms were used exclusively for research and writing.

DEDUCTIONS III: PERSONAL DEDUCTIONS

31)BOB JONES UNIVERSITY V COMMISSIONER Religious groups are charitable organization


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But if they espouse beliefs that are contrary to public policy, then their tax exempt status will bewithdrawn

HEALTH CARE ORGANIZATION

32)GEISINGER HEALTH PLAN V COMMISSIONER An organization must be both organized and operated exclusively for a charitable purpose to

qualify for exemption under 501(c)(3) Operational Test

In addition to being organized exclusively for exempt purposes, the organization inquestion must be operated exclusively for exempt purposes to qualify for tax-exemptstatus under 501(c)(3)

An organization is operated exclusively for exempt purposes only if it engages primarilyin activities which accomplish one or more of such exempt purposes specified in501(c)(3)

Community Benefit Test = Standard for hospitals seeking exempt status Requires that a hospitalprimarily benefit the community for it to qualify for tax exempt

status.

Benefit the Community Based upon a variety of indicia One way to qualify is to provideemergency room services without regard to patients ability to pay; another is to provide freecare to indigents; another way is by serving those who pay their bills through public programs

such as Medicaid or Medicare

33)HERNANDEZ V COMMISSIONERONCE CHARITABLE ORGANIZATION CANINDIVDUALS DEDUCT UNDER S.170

taxpayers have been allowed to deduct the amount of contributions or gifts to charitable,religious, and other eleemosynary institutions.

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