Determine whether the taxpayer in each of the following, Ask an Expert

Accounting

Determine whether the taxpayer in each of the following situations has realized income. Explain why there has or has not been a realization, and determine the amount of income to be reported.

a. Alfredo owns a one-third interest in Bayou Partnership. During the current year, Bayou's taxable income is $45,000.

b. Janet owns a pest-control service. She charges customers $50 per month for basic pest control. Alternatively, customers can pay a lump sum of $500 for one year of basic monthly pest control. During the current year, Janet receives $13,000 in monthly payments and $26,000 in 1-year prepayments.

c. Monte owns 1,000 shares of Ali, Inc., common stock. During the current year, Ali declares and distributes a 20% stock dividend. As a result, Monte receives an addi- tional 200 shares of stock.

d. Rogers Trucking Company owes Big Truck Sales, Inc., $200,000 for the purchase of 3 trucks. Rogers is having a bad year and is unable to make full payment on the debt to Big Truck. Rather than foreclose on Rogers, Big Truck reduces the debt to $170,000 so that Rogers can stay in business.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91647745

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