Identify the rule dictating that on a sale of an asset a taxpayer need only include the incremental gain in gross income rather than the entire proceeds from the sale:
A)Tax benefit rule
B)Constructive receipt
C)Return of capital principle
D)Wherewithal to pay
E)None of the choices are true

Question

Quizplus · Accepted Answer

This is known as the return of capital principle, which states that a taxpayer need only include the incremental gain in gross income rather than the entire proceeds from the sale. The rule is based on the premise that the taxpayer is not realizing a gain on the portion of the sale that is simply a return of their original investment (i.e. their capital).

Identify the Rule Dictating That on a Sale of an Asset