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position of $9,976. However, on account of the alternative
minimum tax, the parties are in further agreement that the
resultant deficiency if respondent’s position is sustained
remains unchanged at $4,448.
OPINION
I. General Rules
As a general rule, the Internal Revenue Code imposes a
Federal tax on the taxable income of every individual and trust.
Sec. 1. Taxable income is defined as gross income less allowable
deductions. Sec. 63(a). Gross income broadly comprises “all
income from whatever source derived,” sec. 61(a), and allowable
deductions are calculated through application of a multi-tiered
process. First, certain enumerated deductions may be subtracted
from gross income to arrive at adjusted gross income. Sec.
62(a). Itemized deductions may then be subtracted from adjusted
gross income in arriving at taxable income. Sec. 63(d).
Itemized deductions, however, are further segregated into
two categories that impact on their deductibility. Section 67(b)
sets forth a list of itemized deductions allowed without further
limitation to the extent permitted under the appropriate
statutory section authorizing the deduction. For individual
taxpayers, the remaining itemized deductions are characterized as
“miscellaneous itemized deductions” and are allowed under section
67(a) only to the extent that they exceed 2 percent of adjusted
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