Chapter 3 MC

Question 1

Which of the following items would be considered constructively received in the current year by a cash-basis taxpayer? I. interest earned from reinvestment of insurance policy dividends that are left with the insurance company II. income from work performed that has been billed but will not be received until next year

Answer 1

I only

Question 2

At the time of occurrence, which of the following events will require recognition of $1,000 of gross income by the taxpayer?

I. The taxpayer receives $1,000 in cash from his mother for his birthday.

II. A creditor cancels the taxpayer’s debt of $1,000.

Answer 2

II only

Question 3

Which of the following statements concerning the doctrine of constructive receipt is (are) correct? I. The taxpayer has constructively received income when it is credited to his account without restrictions. II. It is inapplicable to individual taxpayers who report income on a cash basis.

Answer 3

I only