Judy is a cash basis attorney.In 2011,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 2011.

Question

Quizplus · Accepted Answer

As a cash basis taxpayer, Judy must recognize income when she receives it, regardless of any subsequent changes in its value. Therefore, she must recognize $4,000 of gross income from the stock for 2011, even though its value decreased by the end of the year.

Judy Is a Cash Basis Attorney