Sidney, a cash basis contractor, builds an apartment building for Jerry. The building is completed, and the bill is given to Jerry. Jerry pays $200,000 (1/4 of the bill) in 2018. Subsequently, Jerry files suit for damages based on alleged faulty construction. Sidney is required to recognize $200,000 of income in 2018 based upon
I.Constructive Receipt Doctrine.
II.Claim-of-Right Doctrine.
III.Realization Concept.
IV.Tax Benefit Rule.

Question

Sidney, a cash basis contractor, builds an apartment building for Jerry. The building is completed, and the bill is given to Jerry. Jerry pays $200,000 (1/4 of the bill) in 2018. Subsequently, Jerry files suit for damages based on alleged faulty construction. Sidney is required to recognize $200,000 of income in 2018 based upon
I.Constructive Receipt Doctrine.
II.Claim-of-Right Doctrine.
III.Realization Concept.
IV.Tax Benefit Rule.
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Quizplus · Accepted Answer

Sidney must recognize the $200,000 as income in 2018 under the Claim-of-Right Doctrine, as he has received the payment without restriction, and the Realization Concept, as the income is realized when the payment is received.

Sidney, a Cash Basis Contractor, Builds an Apartment Building for Jerry