Judy is a cash basis attorney.In 2015,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 2015.

Question

Quizplus · Accepted Answer

According to the cash method of accounting, income is recognized when received, which in this case would be when Judy received the stock. The decrease in value of the stock does not affect the fact that she received $4,000 worth of stock as compensation, so she must recognize that as gross income.

Judy Is a Cash Basis Attorney