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.Which of the following dictate that the $200,000 be included in Channel 2's 2076 gross income?
I.Capital Recovery Concept.
II.Claim of Right 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.Which of the following dictate that the $200,000 be included in Channel 2's 2076 gross income?
I.Capital Recovery Concept.
II.Claim of Right Doctrine.
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Quizplus · Accepted Answer

The Claim of Right Doctrine is applicable here because the funds were received by Channel 2 with no restriction or limitation as to their use, and it was believed at the time of receipt that the funds were unrestricted. Therefore, the $200,000 must be included in Channel 2's 2017 gross income. The Capital Recovery Concept is not applicable in this scenario.

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