The IRS’ definition of “Income”

Unwary taxpayers may be unfamiliar with exactly what types of “income” are taxed by the IRS. After all, the Internal Revenue Code is composed of hundreds of income tax provisions that can leave even the most seasoned tax professional bewildered. That being said, nearly all of these statutory sections stem from, in some way or another, to Code Section 61. This all-important section mandates that most income from the following sources is considered “gross income”:

  1. Compensation for services, including fees, commissions, fringe benefits, and similar items
  2. Income derived from business
  3. Gains derived from dealings in property
  4. Interest
  5. Rents
  6. Royalties
  7. Dividends
  8. Alimony and separate maintenance payments
  9. Annuities
  10. Income from life insurance and endowment contracts
  11. Pensions
  12. Forgiven Debt Income, generally
  13. Distributive share of partnership gross income
  14. Income in respect of a decedent
  15. Income from an interest in an estate or trust

Code Section 61 also states that this list is not exhaustive. In other words, other Code sections authorize the IRS to impose the income tax on other types of income. More specifically, Code Sections 71-90 list different forms of income that are to be included in a taxpayer’s gross income. A large source of the governments income tax revenue, though, is raised through Section 61’s wide-sweeping language.

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