Gross Income
Chapter 4
Economists income > change in net worth (ind. Net assets)
Accounting income > not until realized 1. exchange of goods or services 2. exchange must receive assets that are capable of being objectively valued. (embezzlement and buried treasures count)
Form of Receipt: Income equals the value of the service received.
Exchange of service: Income equal to the FMKV of the service they provide.
Recovery of capital doctrine- no income subject to tax until the TP has recovered the capital invested.
Collection of annuity contracts and installment payments received from sales of property must be allocated between recovery of capital and income.
Fiscal year option not available to partnerships, S corp., and personal service corporations.
Cash Receipts method- recognized in the year of actual or constructive receipt by the TP or agent, regardless of weather the income was earned that year. Recognition requires a cash equivalent (fair value). Accts payable does not count.
Accrual method included in income when earned, (1) all the events have occurred that fix the right to receive such income and (2) the amount to be received can be determined with reasonable accuracy. Title passes or services performed.
Income subject to a refund > refund (deduct) when actual
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