This year Henry realized a gain on the sale of an antique car that he inherited from his uncle. The buyer has promised to pay Henry in installment payments over the next few years. Identify the principle that will determine when Henry should be taxed on the gain from the sale.

Question

Quizplus · Accepted Answer

The wherewithal to pay principle is relevant here, as it suggests that taxpayers should be taxed on income when they have the actual financial ability to pay the tax. In the case of installment payments, Henry will be taxed on the gain as he receives the payments, aligning with his ability to pay.

This Year Henry Realized a Gain on the Sale of an Antique