For purposes of determining gross income, which of the following is true?
A) A mechanic completed repairs on an automobile during the year and collects money from the customer. The customer was not satisfied with the repairs and sued the mechanic for a refund. The mechanic can defer recognition of the income until the suit has been settled.
B) A taxpayer who finds a wallet full of money is required to recognize income even though someone may eventually ask for the return of the money.
C) Embezzlement proceeds are not included in the embezzler's gross income because the embezzler has an obligation to repay the owner.
D) All of the above are false.
E) All of the above are true.

Question

Quizplus · Accepted Answer

According to the tax law, all income is taxable unless specifically excluded. Therefore, if a taxpayer finds a wallet full of money, the taxpayer must recognize the found money as income, regardless of whether someone may eventually ask for the return of the money. Choices A and C are false because taxes are due on income as soon as it is earned; the fact that the income is subject to a possible refund or repayment in the future does not change the taxability of the income.

For Purposes of Determining Gross Income, Which of the Following