Gross income, which is subject to the income tax, includes income from any source, unless a specific exclusion is provided by the tax law. Further, as a matter of policy, the courts have construed the exceptions fairly narrowly. Income can be received in different forms: money, property, or services. The fair market value of property or services received must be included in income. The basic principle underlying the taking of deductions is the opposite of the rule regarding gross income: deductions cannot be taken unless specifically authorized by law. Once more, the courts have generally strictly construed the law permitting deductions.

This program examines the various types of gross income, including gross receipts, dividend income, interest income, rents, leasehold improvements, royalties, capital gains, and depreciation recapture. It also addresses income items reported on Form 4797, the types of income classified as Other Income, and the impact of the passive loss rules.

This program includes expert analysis by E. Lynn Nichols, CPA, and John L. Norman, Jr., JD, on video and audio.

Use of Materials

The user should begin by watching the streamed video segment, if any, or listening to the streamed audio segment, if any, for the program before reading the text. The user may wish to make notes of the most important concepts and any terms that are new. Next, the user should review the learning objectives at the beginning of each chapter and read the chapter. The user should work through each of the examples. After the user has studied each chapter, s/he should click on the link at the left to complete the interactive study questions. If the user answers a study question incorrectly, s/he should review the section of the text that is indicated at the end of the explanation to the study question to assure comprehension of the material. The user should review the learning objectives once more to consider achievement of the objectives. After the user has finished watching the streamed video, if any, or listening to the streamed audio, if any, and reading the text and working through the study questions, s/he may wish to review her/his notes and any sections of the text or video/audio, if any, that were difficult. When the user is ready, s/he should click on the link to the left to complete the quizzer. The user's CPE certificate will be provided immediately upon successful completion of the quizzer.

Chapter 1 addresses amounts included and excluded from gross receipts or sales, the "nonaccrual experience method" of accounting for accounts receivable, the proper reporting of installment sales, the provisions allowing qualified taxpayers to use the cash method of accounting, and long-term contracts, including the percentage of completion method, completed contract method, and look-back method. It also addresses advance payments for services and merchandise, the rules pertaining to the mark-to-market election for securities traders and commodities traders and dealers, and how to report gross profit on Form 1120.

Chapter 2 focuses on taxable versus nontaxable dividend income, the reporting requirements for dividends, the holding period requirements for common and preferred stock, dividends received from domestic corporations, debt-financed portfolio stock, preferred stock of public utilities, foreign corporations, foreign sales corporations, and a variety of other entities.

Chapter 3 explains amounts included and excluded from interest income and the requirements for imputed interest.

Chapter 4 examines the proper reporting of gross rents, real estate taxes, advance payments and nonrefundable deposits, leasehold improvements, as well as gross royalties.

Chapter 5 explores the definition of a capital asset, the classification of gains/losses as short term or long term, gains from the sale of a capital asset under IRC §1231, constructive sale of an appreciated financial position, and the special capital gain tax rate for qualified timber gains.

Chapter 6 considers items to be reported on Form 4797, including IRC §1231 property, ordinary gains and losses, gains from disposition of IRC §1245 property and IRC §1250 property, and the depreciation recapture rules.

Chapter 7 reviews those items of income properly classified as Other Income on Form 1120.

Chapter 8 takes a look at IRC §469 and the passive activity rules, including which entities are subject to the passive loss rules, the material participation tests, rental activities that are not considered passive, final Regulation §1.469-4 that defines "activity" and governs the classification of activities, and the special relief provision for real estate professionals.

Chapter 9 describes the at-risk rules under IRC §465 and their application to closely held corporations. Topics include amounts that taxpayers are personally liable for repaying, qualified nonrecourse financing, disallowed losses, and the rules allowing qualified closely held corporations that operate a qualifying business an exemption from the at-risk rules.

Throughout this program, the user will find explanations and discussions regarding some of the issues that often face practitioners. In order to enhance the user's comprehension of the material and highlight important practical considerations, this program includes the following designations:

A Biskpoint presents analysis or commentary that attempts to explain or clarify statutory or regulatory authority or decisions by the judiciary.

A Bisktip provide practical advice that may be used to help improve client service or service to the practitioner's organization.

• Describe the rules and restrictions applicable to the different methods of accounting for gross receipts/sales for income tax purposes

• Calculate the dividends-received deduction

• Classify amounts of income as interest income

• Discuss the proper reporting requirements for rental income

• Define capital assets

• Distinguish between IRC §1245 property and IRC §1250 property

• Properly report items of income as Other Income on Form 1120

• Describe the entities subject to the passive activity rules

• Apply the at-risk rules to a corporation