Applying Gross Income Rules

A Practical Decision Process

Tax professionals often analyze income using a simple sequence of questions. This approach reduces errors and ensures that taxable and nontaxable items are properly identified.

• Did the taxpayer receive an economic benefit?
• Was the benefit received in cash, property, or services?
• Does tax law specifically exclude the item?
• If no exclusion applies, include it in gross income.
• Determine the correct tax year for reporting.

Include first, exclude only when the law clearly allows it.