For the Press
What constitutes income for tax purposes and when it should be recognized is at the heart of much of tax law.
Section 61 of the Internal Revenue Code (IRC) lists items that are included in income, such as wages, dividends, royalties, and interest, but only as specific examples of “all income, from whatever source derived.” Other specified examples include pensions, alimony (though not child support), rents, and some income from insurance contracts. Cancellation of debt income is generally includable in income unless it meets the requirements of section 108. However, the IRC also lists items specifically excluded from gross income, such as gifts and inheritances (section 102), amounts received due to sickness or injury (section 104), and some life insurance proceeds received due to the death of an insured person (section 101). Special rules may apply depending on the taxpayers. For instance, taxation of income of corporations is discussed in subchapter C of the code (section 301, et seq.), partnership taxation in subchapter K (section 701, et seq.), and tax-exempt organizations in subchapter F (section 501, et seq.).
The location of the taxpayer, property, or income may also be relevant. Subchapter N (section 861, et seq.) addresses taxation of nonresident aliens and foreign corporations, and provides for a foreign tax credit for taxes paid by U.S. citizens to foreign countries.
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