Determine the amount of gross income the taxpayer must report in each of the following situations. Explain why the amount is taxable and how you determined the taxable amount.
a.National Corporation receives a $12,000 bill for legal fees from its attorney in December. National paid the bill promptly and deducted the $12,000 as a legal expense for its year ending December 31. During the audit of its financial statements, the auditor determines that the attorney had double billed the corporation for $3,000 of expenses. National sent a copy of the auditor's findings in March. The attorney agrees with the auditor and sends National a check for $3,000 in April.
b.Greta spends a week in Las Vegas. While cashing in some of her chips at the cashier's window, she looks down and sees a $1,000 bill lying crumpled on the floor. She picks up the bill and puts it in her pocket.
c.Akron Living, Inc., an accrual basis corporation, owns an apartment building. On November 1, it rents an apartment for $400 per month. Per the terms of the rental agreement, the tenant pays the corporation $1,100 on November. The $1,100 consists of the first and last months rent and a $300 cleaning deposit. The cleaning deposit will be used at the end of the lease and any amount not used for cleaning will be returned to the tenant. Very little is usually returned.
d.Anthony is an employee of the Channel Company. Channel Company institutes a computer upgrade and offers its old computers for sale for $700. Anthony offers Channel $500 for one of the computers. Because they have not been selling well, Channel accepts Anthony's offer and sells him a computer for $500.
e.James owns Argyle Co. as a sole proprietorship. In November, James pays a $600 bill for supplies and deducts it on his tax return. The following February, the supplier sends James a check for $120. A letter accompanying the check indicated that the supplier had overcharged Argyle Co. and the check was to adjust for the overcharge.

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The Answer of Determine the amount of gross income the taxpayer must report in each of the following situations. Explain why the amount is taxable and how you determined the taxable amount.
a.National Corporation receives a $12,000 bill for legal fees from its attorney in December. National paid the bill promptly and deducted the $12,000 as a legal expense for its year ending December 31. During the audit of its financial statements, the auditor determines that the attorney had double billed the corporation for $3,000 of expenses. National sent a copy of the auditor's findings in March. The attorney agrees with the auditor and sends National a check for $3,000 in April.
b.Greta spends a week in Las Vegas. While cashing in some of her chips at the cashier's window, she looks down and sees a $1,000 bill lying crumpled on the floor. She picks up the bill and puts it in her pocket.
c.Akron Living, Inc., an accrual basis corporation, owns an apartment building. On November 1, it rents an apartment for $400 per month. Per the terms of the rental agreement, the tenant pays the corporation $1,100 on November. The $1,100 consists of the first and last months rent and a $300 cleaning deposit. The cleaning deposit will be used at the end of the lease and any amount not used for cleaning will be returned to the tenant. Very little is usually returned.
d.Anthony is an employee of the Channel Company. Channel Company institutes a computer upgrade and offers its old computers for sale for $700. Anthony offers Channel $500 for one of the computers. Because they have not been selling well, Channel accepts Anthony's offer and sells him a computer for $500.
e.James owns Argyle Co. as a sole proprietorship. In November, James pays a $600 bill for supplies and deducts it on his tax return. The following February, the supplier sends James a check for $120. A letter accompanying the check indicated that the supplier had overcharged Argyle Co. and the check was to adjust for the overcharge.

Determine the Amount of Gross Income the Taxpayer Must Report