Television station Channel 2 receives $200,000 from Harry's Auto Parts,Inc. ,to air Harry's commercials during a local automotive repair talk show in December 2017.December's ratings drop sharply when the show's star quits to work as a mechanic with a NASCAR team.Shortly thereafter,Harry contacts Channel 2 indicating that he wants to discontinue his sponsorship and requests return of $125,000 of the payment.The station continues to air the commercials and keeps the $200,000.Harry initiates a legal suit to recover the $125,000.Why is the $200,000 included in Channel 2's 2017 gross income?
I.All-inclusive Income Concept.
II.Capital Recovery Concept.
III.Wherewithal-To-Pay Concept.
IV.Claim of Right Doctrine.
V.Constructive Receipt Doctrine.

Question

Television station Channel 2 receives $200,000 from Harry's Auto Parts,Inc. ,to air Harry's commercials during a local automotive repair talk show in December 2017.December's ratings drop sharply when the show's star quits to work as a mechanic with a NASCAR team.Shortly thereafter,Harry contacts Channel 2 indicating that he wants to discontinue his sponsorship and requests return of $125,000 of the payment.The station continues to air the commercials and keeps the $200,000.Harry initiates a legal suit to recover the $125,000.Why is the $200,000 included in Channel 2's 2017 gross income?
I.All-inclusive Income Concept.
II.Capital Recovery Concept.
III.Wherewithal-To-Pay Concept.
IV.Claim of Right Doctrine.
V.Constructive Receipt Doctrine.
​

Quizplus · Accepted Answer

The $200,000 is included in Channel 2's 2017 gross income due to the All-inclusive Income Concept, which states that all income is taxable unless specifically excluded. The Wherewithal-To-Pay Concept suggests that income should be recognized when the taxpayer has the means to pay the tax. The Claim of Right Doctrine applies because Channel 2 received the payment without restriction and treated it as their own, even though there was a subsequent dispute.

Television Station Channel 2 Receives $200,000 from Harry's Auto Parts,Inc