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 DOCTRINE NOW 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 Codified 3) Commissioner v Kowalski (1955) The Court found that money is not food, and a plain language reading of 119 does not include cash paid for meals, only for the meals themselves. In general, the Tax Code has been read to state that everything is includable as gross income under 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 rather than 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 $1400.00 the 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.

Intention of the Donee is Important in determining if it is a gift or not o 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 a transfer 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 some random 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 case Clarks 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 income the easement is not a temporary right to use the land of another it is a conveyance of an interest in property no easement here, therefore lease therefore compensation 15) INAJA LAND CO V COMMISSIONER It was an easement therefore compensation for damages but 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

Profit is not required to be reported until it is actually realized until the basis is recovered if there 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.109 18) JAMES V UNITED STATES All gains, even unlawful ones, are considered income for taxes purposes TIMING II: REALIZATION, RECOGNIZATION AND THE PROBLEM OF DEFFERED COMPENSATION LOSS NEEDS 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 residential mortgage loans TIMING III STOCK OPTIONS AND RESTRICTIVE PROPERTY WHEN 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 EXCHANGES NO RECOGNITION OF LOSS OR GAIN UNLESS 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 OF 1962 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 business having plane on standby was an ordinary and necessary expense

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 of business 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 COMMISSIONER TEMPORARY 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 company the 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 spent 1. Relative importance of the place a. 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 home a 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

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

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 in question must be operated exclusively for exempt purposes to qualify for tax-exempt status under 501(c)(3) An organization is operated exclusively for exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in 501(c)(3) Community Benefit Test = Standard for hospitals seeking exempt status Requires that a hospital primarily 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 provide emergency room services without regard to patients ability to pay; another is to provide free care to indigents; another way is by serving those who pay their bills through public programs such as Medicaid or Medicare 33) HERNANDEZ V COMMISSIONER ONCE CHARITABLE ORGANIZATION CAN INDIVDUALS DEDUCT UNDER S.170 taxpayers have been allowed to deduct the amount of contributions or gifts to charitable, religious, and other eleemosynary institutions.