In June, Catherine receives stock worth $12,000 as a graduation present from her Grandfather. The following November she receives an $800 cash dividend on the stock. Catherine must include the $800 dividend in her gross income, but excludes the $12,000 value of the stock received. The income tax concept(s) that require this treatment include:
I.Ability-to-Pay Concept.
II.All-inclusive Income Concept.
III.Constructive Receipt Doctrine.
IV.Legislative Grace Concept.

Question

In June, Catherine receives stock worth $12,000 as a graduation present from her Grandfather. The following November she receives an $800 cash dividend on the stock. Catherine must include the $800 dividend in her gross income, but excludes the $12,000 value of the stock received. The income tax concept(s) that require this treatment include:
I.Ability-to-Pay Concept.
II.All-inclusive Income Concept.
III.Constructive Receipt Doctrine.
IV.Legislative Grace Concept.
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Quizplus · Accepted Answer

The All-inclusive Income Concept requires taxpayers to include all income from whatever source derived in their gross income, which explains why the $800 dividend must be included. The Legislative Grace Concept is the principle that deductions and exclusions are matters of legislative favor; the exclusion of the $12,000 stock gift falls under this concept.

In June, Catherine Receives Stock Worth $12,000 as a Graduation