On Thu, 15 Jul 1999 15:47:50 +1000 "O'Regan, Emlyn" <Emlyn.ORegan@actew.com.au> writes:
>Don't you have to earn actual money (rather than e-bucks) before tax
>comes
>into the picture? I'd love to see a prolonged diatribe from an expert
>on
>this (self proclaimed experts welcome).
>
>Emlyn
>
>
(If you are from Australia, please note that the following refers to the United States federal income tax system. I know next to nothing about Australian taxes.)
The IRS has long taken the position that 'income', for the purpose of the income tax, is defined in the broadest possible terms. If you are paid in chickens, the IRS regards the chickens as income equal to the cash fair market value of the chickens. Same for barter. The IRS even has a form for reporting barter transactions. The IRS uses the term 'taxable boot' for taxable non-cash (or 'in kind') income. Money or value which accrues to the taxpayer's benefit is generally taxable in the year in which it accrues. You are taxed each year on the interest earned each year by a 5-year CD even if it just accumulates in the CD account. You are taxed each year on the imputed growth in value of a 30 year zero coupon bond, even though you don't get the money until the bond matures or is sold.
There are certain kinds of income which are exempt from the income tax, though they may be subject to other taxes such as estate and gift taxes. Those forms of income exempt from the income tax include inheritances, bona fide gifts, casualty insurance settlements, disability payments, awards and settlements for tort damages, life insurance beneficiary proceeds, stipends, indemnities, and loans received.
Ron Kean
.
.
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