Judy is a cash basis attorney.In 2013,she performed services in connection with the formation of a corporation and received stock with a value of $4,000 for her services.By the end of the year,the value of the stock had decreased to $2,000.She continued to hold the stock.Judy must recognize $4,000 of gross income from the stock for 2013.

Question

Quizplus · Accepted Answer

Because Judy is a cash basis taxpayer, she must recognize income when it is actually or constructively received. In this case, she received stock with a value of $4,000 for her services, even though it later decreased in value. Therefore, she must recognize $4,000 of gross income from the stock for 2013.

Judy Is a Cash Basis Attorney