Khen Thi and Hong Van Huynh - Page 5




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               Petitioners have raised a variety of arguments that the                
          payments by the insurance companies do not constitute gross                 
          income.  They contend that the factual situation here is                    
          analogous to the situation where an insured automobile is damaged           
          in an accident.  The insurance company insuring the vehicle pays            
          the body shop for the cost of the repairs, and, in such a                   
          situation, the payments do not constitute gross income to the               
          vehicle owner.  Moreover, petitioners argue, the payments at                
          issue were not unemployment benefits, and, additionally, since              
          the insurance payments approximately equaled the interest due on            
          the credit card liabilities and portions of the insurance                   
          premiums, petitioners realized no economic benefits from the                
          insurance payments because the debts on each credit card remained           
          unpaid, and for which they remained liable.  Finally, petitioners           
          argue that they were not the beneficiaries on the insurance                 
          contracts, and the banks were the beneficiaries.  Because                   
          petitioners were not beneficiaries under the terms of the                   
          insurance contracts, petitioners contend the amounts paid by the            
          insurance companies were not a benefit to them.                             
               Section 61 provides that gross income includes "all income             
          from whatever source derived," unless otherwise provided.  The              
          Supreme Court has consistently given this definition of gross               
          income a liberal construction "in recognition of the intention of           
          Congress to tax all gains except those specifically exempted."              





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