Federal Income Taxation study guide latest edition

Five Step Federal Income Tax Analysis* - (1) Determine GROSS INCOME; (2) Deductions; (3) Characterizations; (4) Apply rates (progressive) to taxable income to arrive at TAX LIABILITY; and (5) Subtract credits from tax liability to meet NET TAX DUE. Definition: Gross Income - Gross income includes ALL income from whatever source derived. Definition: Income (3) - Income is (1) undeniable ACESSIONS TO WEALTH; (2) clearly realized; and (3) over which taxpayers have COMPLETE dominion. Loans are NOT income or gross income unless there is a DISCHARGE OF INDEBTEDNESS. Analysis of Sale/Other Disposition of Property* - (1) Determine gain (or loss) realized; (2) Determine if gain (or loss) is RECOGNIZED; (3) Determine if the gain is EXCLUDED