Chapter 3 T/F Flashcards
All income is includible in a taxpayer’s gross income unless it is specifically excluded by the Code
True
Although there are 15 items listed in the Code that are specifically included in gross income, the definition is not limited to these specifically listed items.
True
When a taxpayer receives a return of capital, the return of capital is subject to income tax.
False. A return of capital is not “income” for tax purposes.
The release of an obligation to pay a debt generally results in taxable income to the debtor.
True
Under the doctrine of constructive receipt, income becomes taxable in the year in which it is constructively received, although it may not actually be in the taxpayer’s possession.
True
The doctrine of constructive receipt determines whether or not a taxpayer has received a taxable economic benefit.
False. The doctrine of constructive receipt is used in determining when an item is included in income, not in determining which item is income.
When an employer lends an employee a company automobile for personal use, the employee has no income attributable to that use.
False. The economic-benefit theory taxes as income any economic or financial benefit conferred on the employee regardless of its form, as long as the employee receives something with a current, real, and measurable value. Use of a car for personal purposes constitutes such an economic benefit.
When a taxpayer assigns income to another taxpayer, the burden of the income tax is shifted to the other individual.
False. Income is always taxed to the person who earns it, creates the right to receive it, or enjoys its benefit, or to the person who earns or controls the property that is the source of the income. Therefore, while it is possible to assign income that one has earned to another person, it will still be taxed to the person who earned the income.
