Memo

|To: |Mr. & Mrs. John Smith |
|From: |----------, CPA |
|CC: |---------------------- |
|Date: |May , 2013 |
|Re: |YOU DECIDE, WEEK 4 |

John Smith Tax Concern
1(a): The issue is the $300,000 in income for John’s fees. How to treat this in Federal Income Tax? In reading Cornell University Law School (as much of this memo comes from) referencing the IRS code, Section 61(a), the code the concept of income is broad and general. 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.
(I.R.C § 61) My investigation of this leads me to conclude that Section 61(a) basically says that the gross income is not limited to these items, but that these are just the most typical sources of income. It is irrelevant whether or not the above items are received in money, goods, or services. So, in your context or question of what to do with the $300,000, the $300,000 that John received for services rendered from the court case is considered earned income for the year and should