Television station Channel 2 receives $200,000 from Harry's Auto Parts, Inc., to air Harry's commercials during a local automotive repair talk show in December 2018. December's ratings drop sharply when the show's star quits to work as a mechanic with a NASCAR team. Shortly thereafter, Harry contacts Channel 2 indicating that he wants to discontinue his sponsorship and requests return of $125,000 of the payment. The station continues to air the commercials and keeps the $200,000. Harry initiates a legal suit to recover the $125,000. Why is the $200,000 included in Channel 2's 2018 gross income?
I.All-inclusive Income Concept.
II.Capital Recovery Concept.
III.Wherewithal-To-Pay Concept.
IV.Claim of Right Doctrine.
V.Constructive Receipt Doctrine.

Question

Television station Channel 2 receives $200,000 from Harry's Auto Parts, Inc., to air Harry's commercials during a local automotive repair talk show in December 2018. December's ratings drop sharply when the show's star quits to work as a mechanic with a NASCAR team. Shortly thereafter, Harry contacts Channel 2 indicating that he wants to discontinue his sponsorship and requests return of $125,000 of the payment. The station continues to air the commercials and keeps the $200,000. Harry initiates a legal suit to recover the $125,000. Why is the $200,000 included in Channel 2's 2018 gross income?
I.All-inclusive Income Concept.
II.Capital Recovery Concept.
III.Wherewithal-To-Pay Concept.
IV.Claim of Right Doctrine.
V.Constructive Receipt Doctrine.
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Quizplus · Accepted Answer

The $200,000 is included in Channel 2's 2018 gross income under the all-inclusive income concept, which requires all income to be recognized when earned, regardless of when it is received. The wherewithal-to-pay concept and the claim of right doctrine also support the inclusion of the $200,000 in Channel 2's 2018 gross income.

Television Station Channel 2 Receives $200,000 from Harry's Auto Parts