Beth is an accrual basis taxpayer.A renter pays Beth the January 2016 rent in December 2015.What are the tax effects of this transaction?
I.Beth will recognize rent income in 2015.
II.The wherewithal-to-pay concept requires Beth to recognize the income in 2015.

Question

Beth is an accrual basis taxpayer.A renter pays Beth the January 2016 rent in December 2015.What are the tax effects of this transaction?
I.Beth will recognize rent income in 2015.
II.The wherewithal-to-pay concept requires Beth to recognize the income in 2015.
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Quizplus · Accepted Answer

Beth, as an accrual basis taxpayer, must recognize income when it is earned or when she has the right to receive it, which is in 2015. The wherewithal-to-pay concept supports recognizing income when the taxpayer has the means to pay the tax, which is also in 2015 when she receives the rent.

Beth Is an Accrual Basis Taxpayer