Question

1. Which is the subchapter of the Code containing Code Section 303?
2. What is the Internal Revenue Code section for a qualified dependent?
3. J. C. has been a professional gambler for many years. He loves this line of work and believes the income is tax-free.
   
   Is J.C. Correct? What court cases can you find that supports your position?

Answer 1

Answer

Part I -

Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter C - Corporate Distributions and Adjustments
PART I - DISTRIBUTIONS BY CORPORATIONS
Subpart A - Effects on Recipients
Sec. 303 - Distributions in redemption of stock to pay death taxes

Part II -

I.R.C. § 152(a) In General —

For purposes of this subtitle, the term “dependent” means—

I.R.C. § 152(a)(1)  —

a qualifying child, or

I.R.C. § 152(a)(2)  —

a qualifying relative.

I.R.C. § 152(b) Exceptions —

For purposes of this section—

I.R.C. § 152(b)(1) Dependents Ineligible —

If an individual is a dependent of a taxpayer for any taxable year of such taxpayer beginning in a calendar year, such individual shall be treated as having no dependents for any taxable year of such individual beginning in such calendar year.

I.R.C. § 152(b)(2) Married Dependents —

An individual shall not be treated as a dependent of a taxpayer under subsection (a) if such individual has made a joint return with the individual's spouse under section 6013 for the taxable year beginning in the calendar year in which the taxable year of the taxpayer begins.

I.R.C. § 152(b)(3) Citizens Or Nationals Of Other Countries

I.R.C. § 152(b)(3)(A) In General —

The term “dependent” does not include an individual who is not a citizen or national of the United States unless such individual is a resident of the United States or a country contiguous to the United States.

I.R.C. § 152(b)(3)(B) Exception For Adopted Child —

Subparagraph (A) shall not exclude any child of a taxpayer (within the meaning of subsection (f)(1)(B)) from the definition of “dependent” if—

I.R.C. § 152(b)(3)(B)(i)  —

for the taxable year of the taxpayer, the child has the same principal place of abode as the taxpayer and is a member of the taxpayer's household, and

I.R.C. § 152(b)(3)(B)(ii)  —

the taxpayer is a citizen or national of the United States.

I.R.C. § 152(c) Qualifying Child —

For purposes of this section—

I.R.C. § 152(c)(1) In General —

The term “qualifying child” means, with respect to any taxpayer for any taxable year, an individual—

I.R.C. § 152(c)(1)(A)  —

who bears a relationship to the taxpayer described in paragraph (2),

I.R.C. § 152(c)(1)(B)  —

who has the same principal place of abode as the taxpayer for more than one-half of such taxable year,

I.R.C. § 152(c)(1)(C)  —

who meets the age requirements of paragraph (3),

I.R.C. § 152(c)(1)(D)  —

who has not provided over one-half of such individual's own support for the calendar year in which the taxable year of the taxpayer begins, and

I.R.C. § 152(c)(1)(E)  —

who has not filed a joint return (other than only for a claim of refund) with the individual's spouse under section 6013 for the taxable year beginning in the calendar year in which the taxable year of the taxpayer begins.

I.R.C. § 152(c)(2) Relationship —

For purposes of paragraph (1)(A), an individual bears a relationship to the taxpayer described in this paragraph if such individual is—

I.R.C. § 152(c)(2)(A)  —

a child of the taxpayer or a descendant of such a child, or

I.R.C. § 152(c)(2)(B)  —

a brother, sister, stepbrother, or stepsister of the taxpayer or a descendant of any such relative.

I.R.C. § 152(c)(3) Age Requirements

I.R.C. § 152(c)(3)(A) In General —

For purposes of paragraph (1)(C), an individual meets the requirements of this paragraph if such individual is younger than the taxpayer claiming such individual as a qualifying child and—

I.R.C. § 152(c)(3)(A)(i)  —

has not attained the age of 19 as of the close of the calendar year in which the taxable year of the taxpayer begins, or

I.R.C. § 152(c)(3)(A)(ii)  —

is a student who has not attained the age of 24 as of the close of such calendar year.

I.R.C. § 152(c)(3)(B) Special Rule For Disabled —

In the case of an individual who is permanently and totally disabled (as defined in section 22(e)(3)) at any time during such calendar year, the requirements of subparagraph (A) shall be treated as met with respect to such individual.

I.R.C. § 152(c)(4) Special Rule Relating To 2 Or More Who Can Claim The Same Qualifying Child

I.R.C. § 152(c)(4)(A) In General —

Except as provided in subparagraphs (B) and (C), if (but for this paragraph) an individual may be claimed as a qualifying child by 2 or more taxpayers for a taxable year beginning in the same calendar year, such individual shall be treated as the qualifying child of the taxpayer who is—

I.R.C. § 152(c)(4)(A)(i)  —

a parent of the individual, or

I.R.C. § 152(c)(4)(A)(ii)  —

if clause (i) does not apply, the taxpayer with the highest adjusted gross income for such taxable year.

I.R.C. § 152(c)(4)(B) More Than 1 Parent Claiming Qualifying Child —

If the parents claiming any qualifying child do not file a joint return together, such child shall be treated as the qualifying child of—

I.R.C. § 152(c)(4)(B)(i)  —

the parent with whom the child resided for the longest period of time during the taxable year, or

I.R.C. § 152(c)(4)(B)(ii)  —

if the child resides with both parents for the same amount of time during such taxable year, the parent with the highest adjusted gross income.

I.R.C. § 152(c)(4)(C) No Parent Claiming Qualifying Child —

If the parents of an individual may claim such individual as a qualifying child but no parent so claims the individual, such individual may be claimed as the qualifying child of another taxpayer but only if the adjusted gross income of such taxpayer is higher than the highest adjusted gross income of any parent of the individual.

I.R.C. § 152(d) Qualifying Relative —

For purposes of this section—

I.R.C. § 152(d)(1) In General —

The term “qualifying relative” means, with respect to any taxpayer for any taxable year, an individual—

I.R.C. § 152(d)(1)(A)  —

who bears a relationship to the taxpayer described in paragraph (2),

I.R.C. § 152(d)(1)(B)  —

whose gross income for the calendar year in which such taxable year begins is less than the exemption amount (as defined in section 151(d)),

I.R.C. § 152(d)(1)(C)  —

with respect to whom the taxpayer provides over one-half of the individual's support for the calendar year in which such taxable year begins, and

I.R.C. § 152(d)(1)(D)  —

who is not a qualifying child of such taxpayer or of any other taxpayer for any taxable year beginning in the calendar year in which such taxable year begins.

I.R.C. § 152(d)(2) Relationship —

For purposes of paragraph (1)(A), an individual bears a relationship to the taxpayer described in this paragraph if the individual is any of the following with respect to the taxpayer:

I.R.C. § 152(d)(2)(A)  —

A child or a descendant of a child.

I.R.C. § 152(d)(2)(B)  —

A brother, sister, stepbrother, or stepsister.

I.R.C. § 152(d)(2)(C)  —

The father or mother, or an ancestor of either.

I.R.C. § 152(d)(2)(D)  —

A stepfather or stepmother.

I.R.C. § 152(d)(2)(E)  —

A son or daughter of a brother or sister of the taxpayer.

I.R.C. § 152(d)(2)(F)  —

A brother or sister of the father or mother of the taxpayer.

I.R.C. § 152(d)(2)(G)  —

A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.

I.R.C. § 152(d)(2)(H)  —

An individual (other than an individual who at any time during the taxable year was the spouse, determined without regard to section 7703, of the taxpayer) who, for the taxable year of the taxpayer, has the same principal place of abode as the taxpayer and is a member of the taxpayer's household.

Part III-

All gambling winnings are taxable income—

that is, income subject to both federal and state income taxes (except for the seven states that have no income taxes). It makes no difference how you earn your winnings--whether at a casino, gambling website, church raffle, or your friendly neighborhood poker game.

It also makes no difference where you win: whether at a casino or other gambling establishment in the United States (including those on Indian reservations), in a foreign country such as Mexico or Aruba, on a cruise ship, Mississippi river boat, or at an online casino hosted outside the U.S.

Gambling winnings include not only the money you win, but the fair market value of any prizes or “comps” you receive as well.

If, like the vast majority of people, you’re a casual recreational gambler, you’re supposed to report all your gambling winnings on your tax return every year. You report the amount as “other income” on Schedule 1 of IRS Form 1040. You list them as "other income" in line 21. You may not subtract your losses from your winnings and you only report the amount left over, if any. You’re supposed to report every penny you win, even if your losses exceeded your winnings for the year.

Therefore,

J.C. is incorrect. his income is taxable.