Judy is a cash basis attorney.In 2016,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 2016.

Question

Quizplus · Accepted Answer

Under the cash basis of accounting, income is recognized when received or constructively received. In this case, Judy received stock with a value of $4,000 for her services in 2016, therefore, she must recognize $4,000 of gross income from the stock for that year, regardless of its current value at the end of the year.

Judy Is a Cash Basis Attorney