ACCT2331 Chapter 10: Chapter 10
Document Summary
Chapter 10 - ordinary income (s 6-5 itaa97) Judges adopted a process of characterisation" instead of providing comprehensive definition for income" [p256: gain concept [p257] Nothing to tax until gain is crystallized. Types of gains: income gain vs. capital gain. Capital gains are only assessable if caught by specific statutory income provision: accretion, flow and trust concepts of income. United states: accretion concept, australia: trust and flow concept [p257] Trust concept" draws distinction between income" and corpus" [p257] Fruit and tree" metaphor depicted flow concept for us court eisner v macomber (1920) Returns generated form exploitation/use of capital assets ordinary nature. Gain made from the realisation (e. g. sale) of capital asset is not of income status. Income tax is not tax upon accumulated wealth, but upon its periodic accretions". Factors to consider during characterisation process: quality in the hands of recipient, reliance and regularity [p258]
