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Gross income: inclusions and exclusions

REG Chapter 12 · Area IV · Blueprint IV.A

Gross income is where every Form 1040 begins, and the Blueprint gives it six representative tasks: compute what is included (wages, interest, dividends, guaranteed payments, fringe benefits, retirement income, punitive damages), compute capital gains on investments, gifts, inherited assets and digital assets, compute what is excluded, compute a decedent's final-year income, and review a return and its diagnostic checks. Rosa and Ivan Delgado, Harbor Lane clients with jobs, investments, a rental, a home sale and a family death in 2026, bring every item to Reggie's desk. Figures are for tax year 2026.

In this chapter

1. What counts as gross income, and when
2. Compensation and fringe benefits
3. Interest and dividends
4. Retirement income and Social Security
5. Business, partnership and other income
6. Exclusions from gross income
7. Capital gains: classification and rates
8. Excluding gain on a home (§121) and small business stock (§1202)
9. The decedent's final return and reviewing gross income

This chapter has 9 lessons, 50 practice MCQs with explanations and 20 simulations, plus flashcards and a recall sheet.

What this chapter covers

• Wages, interest, dividends, guaranteed payments, fringe benefits, retirement income, damages
• capital gains including digital assets
• exclusions
• a decedent's final return

Chapter 11: Cost recovery · Chapter 13: Items from pass-through entities