Legal Question in Tax Law in Massachusetts

Re: Taxable Income Sources

It's probably simpler to list what income ISN'T taxable. Here are the most popular, each of which has to meet specific IRS requirements:

Life insurance proceeds (the death benefit), other insurance benefits (health, medical), benefits paid by your employer directly, compensation for an injury or sickness, payments for something you sell (to the extent that what you sell has that value and you carry a high enough asset basis!), certain income from discharge of indebtedness (think of a loan forgiven as income), improvements by your tenants to your property, municipal bond interest (and interest from small issue, mortgage revenue, hospital, and charity bonds), scholarships, gifts you receive, inheritances you receive, combat pay, educational expenses paid by your employer, meals and housing bought for you by your employer, living expenses covered by insurance, employee stock purchase plan deals (including loans for purchase of the stock), fringe benefits, savings bond income when used for education, and capital gains on sale of your residence.

Again, all of these exceptions must meet requirements that I haven't listed to be excluded, but that's a pretty good list.

NOW, WHY DID YOU ASK? You must have had something in mind! Write to me at [email protected] and tell me what you really want to know!

Stuart J. Williams

(617) 527-0050

Re: Taxable Income Sources

Following is the applicable section from the Internal Revenue Code:

SECTION 61. GROSS INCOME DEFINED

(a) GENERAL DEFINITION

Except as otherwise provided in this subtitle, gross income means all

income from whatever source derived, including (but not limited to) the

following items:

(1) Compensation for services, including fees, commissions, fringe

benefits, and similar items;

(2) Gross 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) Income from discharge of indebtedness;

(13) Distributive share of partnership gross income;

(14) Income in respect of a decedent; and

(15) Income from an interest in an estate or trust.

(b) CROSS REFERENCES

FOR ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME, SEE PART II (sec. 71 and

following). FOR ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME, SEE PART III

(sec. 101 and following).