After buying a new sofa at the furniture store, Hilda finds a $1,000 bill in the parking lot near her car. What are the tax effects of this find?
I.Hilda must recognize $1,000 of income for this tax year.
II.The all-inclusive-income concept applies in this situation.
III.Hilda will not recognize the $1,000 because the IRS will never know about the windfall.
IV.Hilda will not recognize the $1,000 because there is not a specific tax law provision requiring it.

Question

After buying a new sofa at the furniture store, Hilda finds a $1,000 bill in the parking lot near her car. What are the tax effects of this find?
I.Hilda must recognize $1,000 of income for this tax year.
II.The all-inclusive-income concept applies in this situation.
III.Hilda will not recognize the $1,000 because the IRS will never know about the windfall.
IV.Hilda will not recognize the $1,000 because there is not a specific tax law provision requiring it.
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Quizplus · Accepted Answer

The correct answers are statements I and II. According to the all-inclusive income concept, all income from whatever source derived is taxable unless specifically excluded by law. Finding money is considered a form of income, and thus Hilda must recognize $1,000 of income for this tax year. There is no specific exclusion for found money, making both statements I and II correct.

After Buying a New Sofa at the Furniture Store, Hilda