Under the Wherewithal to Pay concept, income should be recognized and a tax paid on the income when the taxpayer has the resources to pay the tax.

Question

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The Wherewithal to Pay concept is based on the principle that income should be recognized and taxed when the taxpayer has the financial ability to pay the tax, regardless of whether the income has been realized or received. This means that a tax liability may be recognized even if the taxpayer has not yet received the income, but has the means to pay the tax owed on that income.

Under the Wherewithal to Pay Concept, Income Should Be Recognized