Section 61 of the Internal Revenue Code (IRC 61, ) defines "gross income," the starting point for determining which items of income are taxable for federal income tax purposes in the United States. Section 61 states that " cept as otherwise provided in this subtitle, gross income means all income from whatever source derived

. . . The ellipsis (, also known informally as dot dot dot) is a series of dots that indicates an intentional omission of a word, sentence, or whole section from a text without altering its original meaning. The plural is ellipses. The term origin ...

. The United States Supreme Court has interpreted this to mean that Congress intended to express its full power to tax incomes to the extent that such taxation is permitted under Article I, Section 8, Clause 1 (the Taxing and Spending Clause) of the

Constitution of the United States The Constitution of the United States is the supreme law of the United States of America. It superseded the Articles of Confederation, the nation's first constitution, in 1789. Originally comprising seven articles, it delineates the nati ...

and under the Constitution's Sixteenth Amendment.

Scope

Section 61 contains a rare example of ''intensive redundancy'', or ''emphatic redundancy'', in the

Internal Revenue Code The Internal Revenue Code (IRC), formally the Internal Revenue Code of 1986, is the domestic portion of federal statutory tax law in the United States, published in various volumes of the United States Statutes at Large, and separately as Title 2 ...

. That is, the parenthetical phrase "but not limited to" redundantly intensifies the significance of the phrase "all income" and the phrase "from whatever source derived." Under ordinary rules of statutory construction the list of specific items of income would not, even in the absence of the parenthetical intensive, be considered a complete list of all items of income included in "gross income" under the definition. The use of the word "including" also highlights this expansive definition of "gross income." Under Internal Revenue Code , " e terms 'includes' and 'including' when used in a definition contained in this title shall not be deemed to exclude other things otherwise within the meaning of the term defined." Under the 1959 U.S. Supreme Court case of ''Sims v. United States'', the terms "includes" and "including" in section 7701 are terms of expansion, not terms of exclusivity. The phrase "except as otherwise provided in this subtitle" generally refers to the items of income that are excluded from "gross income" under Internal Revenue Code provisions such as sections 101 through 140. For example, excludes certain life insurance proceeds received by reason of the death of the insured. excludes certain gifts and inheritances. excludes interest income on state and municipal bonds. excludes certain amounts received on account of injuries or sickness.

Types of § 61 income

Section 61 lists examples of items that are taxable under the Code, including " Compensation for services, including fees, commissions,

fringe benefit Employee benefits and (especially in British English) benefits in kind (also called fringe benefits, perquisites, or perks) include various types of non-wage compensation provided to employees in addition to their normal wages or salaries. Insta ...

s, and similar items"; "Gross income derived from business"; and "Gains derived from dealings in property". Other examples of income listed in section 61 include

interest In finance and economics, interest is payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is distin ...

and

dividends A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-in ...

rent Rent may refer to: Economics *Renting, an agreement where a payment is made for the temporary use of a good, service or property *Economic rent, any payment in excess of the cost of production *Rent-seeking, attempting to increase one's share of e ...

royalty payments A royalty payment is a payment made by one party to another that owns a particular asset, for the right to ongoing use of that asset. Royalties are typically agreed upon as a percentage of gross or net revenues derived from the use of an asset o ...

alimony Alimony, also called aliment (Scotland), maintenance (England, Ireland, Northern Ireland, Wales, Canada, New Zealand), spousal support (U.S., Canada) and spouse maintenance (Australia), is a legal obligation on a person to provide financial sup ...

payments;

life insurance Life insurance (or life assurance, especially in the Commonwealth of Nations) is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money upon the dea ...

pensions A pension (, from Latin ''pensiō'', "payment") is a fund into which a sum of money is added during an employee's employment years and from which payments are drawn to support the person's retirement from work in the form of periodic payments ...

, and

inheritance Inheritance is the practice of receiving private property, titles, debts, entitlements, privileges, rights, and obligations upon the death of an individual. The rules of inheritance differ among societies and have changed over time. Of ...

s. Eligible sources of gross income may be located in section 861.

Compensation for services

Income from Compensation for services include fees, commissions,

s, and similar items. The employer may also compensate the employee-taxpayer indirectly. A taxpayer may receive taxable income from the taxpayer's employer when the employer pays the taxpayer's taxes. In 1929, the

United States Supreme Court The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. It has ultimate appellate jurisdiction over all U.S. federal court cases, and over state court cases that involve a point o ...

decided the case of '' Old Colony Trust Co. v. Commissioner''. The

employer Employment is a relationship between two parties regulating the provision of paid labour services. Usually based on a contract, one party, the employer, which might be a corporation, a not-for-profit organization, a co-operative, or any o ...

paid incomes taxes on behalf of an

employee Employment is a relationship between two parties regulating the provision of paid labour services. Usually based on a contract, one party, the employer, which might be a corporation, a not-for-profit organization, a co-operative, or any ot ...

, and the Court questioned whether that payment constituted additional taxable income to the employee. The Court decided that the payment constituted income to the employee because "the

discharge Discharge may refer to Expel or let go * Discharge, the act of firing a gun * Discharge, or termination of employment, the end of an employee's duration with an employer * Military discharge, the release of a member of the armed forces from ser ...

by a third person of an

obligation An obligation is a course of action that someone is required to take, whether legal or moral. Obligations are constraints; they limit freedom. People who are under obligations may choose to freely act under obligations. Obligation exists when th ...

to him is equivalent to

receipt A receipt (also known as a packing list, packing slip, packaging slip, (delivery) docket, shipping list, delivery list, bill of the parcel, manifest, or customer receipt) is a document acknowledging that a person has received money or proper ...

by the person taxed." Thus, even when a taxpayer does not directly receive compensation for services, the compensation may be considered gross income if the payment releases the taxpayer from an obligation. The issue of whether indirect payments for services should be included in gross income arose again in '' McCann v. United States''. In ''McCann'', the court had to decide whether travel expenses paid by an employer to enable an employee to attend a company conference were part of the employee's gross income. The company provided the travel

award An award, sometimes called a distinction, is something given to a recipient as a token of recognition of excellence in a certain field. When the token is a medal, ribbon or other item designed for wearing, it is known as a decoration. An awar ...

to the employee for good work in increasing net sales during 1972. The court held that the travel expenses were compensation to the employee for services rendered to the company during 1972 and should be included in gross income. Therefore, when a company pays travel expenses, a taxpayer must include such compensation in gross income when the

excursion An excursion is a trip by a group of people, usually made for leisure, education, or physical purposes. It is often an adjunct to a longer journey or visit to a place, sometimes for other (typically work-related) purposes. Public transportation ...

is viewed as a reward for outstanding employee success within the company. Similar to ''McCann'', the issue in ''

United States v. Gotcher United States v. Gotcher, 401 F.2d 118 (5th Cir. 1968), is a tax case from the United States Court of Appeals for the Fifth Circuit. Facts This case involved a twelve-day expense-paid trip to Germany for Mr. and Mrs. Gotcher to tour Volkswagen ...

'' involved an expense-paid trip. The employer paid for the employee to travel to

Germany Germany,, officially the Federal Republic of Germany, is a country in Central Europe. It is the second most populous country in Europe after Russia, and the most populous member state of the European Union. Germany is situated betwee ...

to induce the employee to undertake further

business Business is the practice of making one's living or making money by producing or buying and selling products (such as goods and services). It is also "any activity or enterprise entered into for profit." Having a business name does not separ ...

endeavors. The court held that the employee's expenses paid by the employer were not gross income because the "indirect

economic An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with th ...

gain o the employee wassubordinate to an overall business purpose." However, the court found that the employee's wife, who accompanied her husband on the trip, incurred gross income because the wife's trip was primarily a

vacation A vacation (American English) or holiday (British English) is either a leave of absence from a regular job or an instance of leisure travel away from home. People often take a vacation during specific holiday observances or for specific fes ...

. As such, a taxpayer does not acquire gross income from an expense-paid trip provided by the employer when the primary and overall purpose relates to business interests.

Business income

Gross income derived from business

Discharge of Indebtedness

One form of income listed in the Code, that of "discharge of indebtedness" is not often considered income by lay persons. If, however, a taxpayer owes a debt to any other party, and that debt is forgiven without being fully repaid, the taxpayer must as a general rule declare the forgiven amount as income, and must pay tax on it.This provision does not apply to debts where the amount is unsettled, or to certain debts in bankruptcy, insolvency and certain other limited situations. For example, suppose John claims to be owed $100,000 by Bill, based on a personal injury suffered by John that was caused by Bill. Suppose also that Bill insists that he owes John only $500. If they agree to settle the dispute for $700, Bill (the taxpayer) has not been relieved of any debt that was clearly owed.

Passive income

capital gain Capital gain is an economic concept defined as the profit earned on the sale of an asset which has increased in value over the holding period. An asset may include tangible property, a car, a business, or intangible property such as shares. A ...

and

Other

payments,