Judy is a cash basis attorney. In 2017, 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 2017.

Question

Quizplus · Accepted Answer

As a cash basis taxpayer, Judy is required to recognize the full value of the stock she received as gross income in the year she received it, regardless of any subsequent fluctuations in value. Therefore, she must recognize $4,000 of gross income from the stock for 2017.

Judy Is a Cash Basis Attorney