Under the cash method, a taxpa
Under the cash method, a taxpayer includes in his or her grossincome all items of income actually or constructively receivedduring the tax year. If he or she receives property and services,the taxpayer must include what amount in income?
Answer:
A cash method is an accounting method that reports income whenconstructively received and expenses when paid.
A tax payer includes an item in come when it is actually orconstructively received. Under Section 461 a, a cash basis taxpayergenerally reports income only in the year of actual receipt.Constructive receipt is same as actual receipt and it occurs whenpayment is made available to the taxpayer without restriction.
Under the cash method, a taxpayer accounts for an item of incomewhen:
1. Constructive receipt of cash occurs.
2. Cash is actually received.
3. An equivalent of cash is actually received.
Under the cash method, a taxpayer includes all items of incomein gross income, actually or constructively received during the taxyear. If he receives property and services, the taxpayer mustinclude fair market value in income.
The taxpayer have constructive receipt of income when an amountis made available without restriction. The taxpayer donot need tohave possession of it. The taxpayer cannot postpone takingpossession of similar property from one tax year to another toaboid paying tax on the income. He must report the income in theyear the property is received or made available withoutrestiction.
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