M2 - Gross Income: Part I

Question 1

Realization

Answer 1

Realization requires the accrual or receipt of cash, property, or services, or a change in the form of the investment (a sale or exchange).

Question 2

Recognition

Answer 2

Recognition means that the realized gain must be included on the tax return.

Question 3

Accrual Method

Answer 3

Revenue recognition occurs according to the rules of GAAP; that is, revenue is taxable when earned.

Question 4

Cash Method

Answer 4

Revenue recognition occurs in the period the revenue is actually or constructively received in cash or fair market value (FMV) of property.