Chapter 5 Problem Solutions

Chapter 5 Problem Solutions - Chapter 5 Recommended Problem...

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1 Chapter 5 Recommended Problem Solutions 6) Both Andre and Blair are required to recognize gross income equal to the value of the goods and services they received. Reg. §1.61-(a) indicates that taxpayers realize income whether they receive money, property, or services in a transaction. That is, the form of the receipt does not matter. In this case, Andre should report gross income equal to the carpet he received and Blair should report gross income equal to the value of the cabinets he received. 11) The constructive receipt doctrine states that a taxpayer realizes and recognizes income when it is actually or constructively received. Constructive receipt is deemed to occur when the income has been credited to the taxpayer’s a ccount or when the income is unconditionally available to the taxpayer, the taxpayer is aware of the income’s availability, and there are no restrictions on the taxpayer’s control over the income. This doctrine prevents Janet, a cash basis taxpayer, from arbitrarily shifting income to a later period by postponing the delivery or acceptance of a payment. It does not matter if she refuses to open the envelope or check her mail, because the income is unconditionally available to her, she is aware of the incom e’s availability, and there are no restrictions on her control over the income. 13) The constructive receipt doctrine states that a taxpayer realizes and recognizes income when it is actually or constructively received. Constructive receipt is deemed to occur when the income has been
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