Ch 5 tax terms or whatever Flashcards
The portion of proceeds from a sale representing a return of the original cost of the underlying property.
Return of Capital Doctrine
Wherewithal to Pay
The ability or resources to pay taxes due from a particular transaction.
Tax Benefit Rule
If a refund is made for an expenditure deducted in a previous year, the refund is included in gross income to the extent the taxpayer received a tax benefit from the prior deduction.
Accrual Method
A method of accounting that generally recognizes income in the period that it is earned and recognizes deductions in the period that liabilities are incurred.
Economic Benefit
In order to realize income, the taxpayer must receive value to have income.
Recognition
Income that has been realized and is now reported in gross income.
Form of Receipt
The concept that taxpayers realize income whether they receive money, property, or services in the transaction.
Gross Income
All income from whatever source derived, unless excluded by law.
Realization Principle
The principle that income only exists when there is a transaction with another party resulting in a measurable change in property rights.
Claim of Right Doctrine
The judicial doctrine that states that income has been realized if a taxpayer receives income and there are no restrictions on the taxpayer’s use of the income (e.g., the taxpayer does not have an obligation to repay the amount).
Cash Method
A method of accounting that recognizes income in the period in which cash, property, or services are received and recognizes deductions in the period paid.
Assignment of Income Doctrine
The judicial doctrine stating that earned income is taxed to the taxpayer providing the service, and that income property is taxed to the individual who owns the property when the income accrues.
Community Property System
System in which income earned from services by one spouse is treated as though it were earned equally by both spouses.
Constructive Receipt Doctrine
The judicial doctrine that provides that a taxpayer must recognize income when it is actually or constructively received. The latter is deemed to have occurred if the income has been credited to the taxpayer’s account or if 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.
Common Law System
System in which income earned from services by one spouse is treated as though it were earned only by that spouse.
