Ch_4_Questions - Income Tax I Name_Christian Yimgnia...

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Income Tax I Name __Christian Yimgnia_________ Chapter 4 Questions Explain and/or discuss the following based on reading the chapter and viewing the power points. Be thorough with your answers. You may take all the space you need. Describe in your own words the following terms/concepts. Prove to me you understand the topic. 1. Realization of income. The realization of income is when gain is recognized and recorded when realized. The gain is considered an income when it is recognized and realized for a certain period of time. For example if I buy a land for $5,000 and sell it five years later for $10,000, the $5,000 gain I make on the sale of the land is realizable income. 2. Economic Benefit Doctrine The economic benefit doctrine talks about “what” is income or “what” income is an individual receiving. Therefore any amount of compensation granted or paid to the individual for services rendered should be recognized as gross income. This doctrine basically addresses any benefit an individual might receive in exchange of service and it should be taxed. 3. Constructive Receipt Doctrine The constructive receipt doctrine addresses the “when” of the income. So the income is usually recognized at the time the cash is received and available to the individual. Sometimes income is recognized on an accrual basis, but this doesn’t work with the constructive receipt doctrine. It is only applicable when the individual has absolute right
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This note was uploaded on 09/27/2011 for the course INCOME TAX 4404 taught by Professor Bulie during the Spring '11 term at University of Minnesota Duluth.

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Ch_4_Questions - Income Tax I Name_Christian Yimgnia...

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