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IRC 61 (Explained: What It Is And What You Should Know)

Looking for IRC 61?

What type of income is included in gross income for tax purposes?

What should you know?

Keep reading as we have gathered exactly the information that you need!

Let me explain to you how income is defined by the Internal Revenue Code!

Are you ready?

Let’s get started!

What Is IRC 61

IRC 61 refers to Section 61 of the Internal Revenue Code titled “Gross income defined”.

Essentially, under IRC Section 61, we have the general definition of gross income for tax purposes.

For tax purposes, a taxpayer must calculate his or her total gross income by adding up all the income they have derived for all sources.

For example, business income, discharge of indebtedness, passive income, dividend income, life insurance income, rental income, and other types of income should be included in the calculation of your total gross income.

Section 61 IRC also provides a list of different types of income that should be considered as gross income.

Let’s look at how 61 IRC to better understand what it entails.

How IRC 61 Works

Let’s look at the Internal Revenue Code 61 in more detail to see how the tax code defines gross income.

The general rule in IRS Section 61 is that gross income means:

All income from whatever source derived
Author

IRS Code Section 61 further gives a non-exhaustive list of what can include gross income for taxation purposes as follows:

  • IRC 61(a)(1) Compensation for services, including fees, commissions, fringe benefits, and similar items;
  • IRC 61(a)(2) Gross income derived from business;
  • IRC 61(a)(3) Gains derived from dealings in property;
  • IRC 61(a)(4) Interest;
  • IRC 61(a)(5) Rents;
  • IRC 61(a)(6) Royalties;
  • IRC 61(a)(7) Dividends;
  • IRC 61(a)(8) Annuities;
  • IRC 61(a)(9) Income from life insurance and endowment contracts;
  • IRC 61(a)(10) Pensions;
  • IRC 61(a)(11) Income from discharge of indebtedness;
  • IRC 61(a)(12) Distributive share of partnership gross income;
  • IRC 61(a)(13) Income in respect of a decedent; and
  • IRC 61(a)(14) Income from an interest in an estate or trust.

As you can see, compensation, income from a business, interest income, rental revenue, royalties from software or copyrighted material, and other types of income fall within the definition of gross income.

Income Exclusion

IRC 61a states:

Except as otherwise provided in this subtitle, gross income means all income from whatever source derived
Author

The exception refers to income that is specifically excluded by the Internal Revenue Code.

For example, IRC 101 excludes certain life insurance proceeds paid out to beneficiaries due to the insured’s death.

Another example is IRC 102 where certain gifts and inheritances are excluded from the definition of gross income.

You can consult Internal Revenue Code Sections 101 to 140 to identify a series of income that is excluded from the definition of gross income.

All Income

IRC 61 moves on to say that:

Gross income means all income from whatever source derived
Author

“All income” suggests that any income you earn will be considered income for taxation purposes.

Types of Income

IRC 61 moves on to say that:

Gross income means all income from whatever source derived
Author

All income includes all types of income whether derived by earning a salary, wages, service income, the discharge of indebtedness, business income, or any other income that you may earn.

IRCa1 to IRCa14 provides a list of different types of income that will be considered as gross income for tax purposes.

This list is not exhaustive as IRS 61 specifically says:

Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items:
Author

The “including (but not limited to)” suggests that gross income can include any of the below list but can also include other types of income.

IRC Section 61 Takeaways 

So, what is IRC Sec 61?

IRC 61 provides the definition “gross income” to help you determine your taxable income for federal income tax purposes.

In essence, IRC 61 states that all income derived from any sources should be included in the definition of gross income.

For example, if you are looking to calculate your total gross income in accordance with Section 61 IRS, you’ll need to add up all the income you have received from all possible sources, such as:

  • Compensation from services
  • Commissions
  • Fringe benefits
  • Salary 
  • Wages
  • Business income
  • Property income
  • Interest income
  • Rental income
  • Royalties 
  • Dividend income
  • Annuities
  • Life insurance income
  • Pension income
  • Discharge of indebtedness
  • Partnership distributive income
  • Income in respect to a decedent
  • Income from a trust
  • Income from an estate 

The Internal Revenue Code provides for some exceptions where certain types of income are specifically excluded from the definition of gross income, such as:

  • Certain life insurance proceeds relating to the death of the insured
  • Certain gifts
  • Certain inheritances
  • Interest income from state or municipal bonds
  • Money received due to injury or illness 

I hope I was able to provide you with an overview of IRS 61 so you know what it is and why it’s important.

Remember, if you need to compute your gross income for tax purposes or you have a legal issue on this matter, you should consult a tax attorney or a tax professional.

This article is for your general information to help you in your research.

Good luck with Section 61 IRS!

Let’s look at a summary of our findings.

Understanding IRC 61

  • IRC 61 refers to Section 61 Internal Revenue Code titled Gross Income Defined
  • § 61 IRC provides the definition of gross income stating that “all income” you derive from “whatever source” should be included in the definition of gross income
  • This provision also specifies what should be considered as gross income such as income derived from a business, gains derived from dealing in property, compensation for services, commissions, and so on
  • You should keep in mind that some income is specifically excluded from this definition of gross income such as those indicated in IRC 101 to IRC 140
Adjusted gross income 
Alimony definition
Annuity income definition 
Community income
Distributive income 
Dividend income definition 
Federal income definition
Fring benefit definition 
Gross income definition
Interest income definition 
Ordinary income 
Ordinary loss
Pension income definition 
Rental income definition 
Royalty income definition 
Taxable income definition
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IRC 1001
IRC 1017
IRC 1041
IRC 108
IRC 1202
IRC 162
IRC 168
IRC 199a
IRC 2018
IRC 263
IRC 267
IRC 351
IRC 368
IRC 61
IRC 61
IRC 965
Author

Editorial Staffhttps://lawyer.zone
Hello Nation! I'm a lawyer and passionate about law. I've practiced law in a boutique law firm, worked in a multi-national organization and as in-house counsel. I've been around the block! On this blog, I provide you with golden nuggets of information about lawyers, attorneys, the law and legal theories. Enjoy!

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