Dr.Payne Phull is a cash basis taxpayer.Normally, his patients pay his fee on the day they see him in the office.For some customers, his office processes a medical reimbursement claim and bills the insurance company for the visit.In the current year, his records reveal the following: Cash received at time of office visit $\quad \$ 70,000$
Collections on insurance receivables $\quad$88,000
Total accounts receivable, January $1 \quad 5,000$
Total accounts receivable, December $31 \quad 15,000$ All of the receivables outstanding at the beginning of the year were collected during the year.What amount should Dr.Phull report as his income this year?

Question

Quizplus · Accepted Answer

As a cash basis taxpayer, Dr. Phull reports income when it is actually or constructively received. Therefore, his income for the year includes cash received at the time of office visits ($70,000) plus collections on insurance receivables ($88,000), totaling $158,000. Changes in accounts receivable do not affect his reported income because these amounts have not been received in cash.

DrPayne Phull Is a Cash Basis Taxpayer $70,000\quad \$ 70,000$70,000 Collections on Insurance Receivables

DrPayne Phull Is a Cash Basis Taxpayer $\quad \$ 70,000$ Collections on Insurance Receivables