Match each statement with the correct term below.
-Tax Benefit Rule
A)Taxpayer reports income when received in cash or its equivalent and takes deductions as they are paid.
B)A deduction taken in one year that is recovered in a later year is reported as income in the year of recovery to the extent that the deduction reduced taxable income.
C)Taxpayer reports income as earned and deductions as incurred.
D)The result of an arms-length transaction.
E)Exclusions and deductions result from specific acts of Congress that must be strictly applied and interpreted.
F)The taxability of a transaction is determined by the reality of the transaction rather than some contrived appearance.
G)The reporting of an item of income or expense on a tax return
H)No income is realized until the taxpayer's invested capital is recovered.
I)All income received is taxable unless some specific provision of the tax law allows exclusion of the item.
J)These taxpayers are not deemed to transact at arms-length.

Question

Quizplus · Accepted Answer

The Tax Benefit Rule requires that if a taxpayer receives a refund in a later year for an expense that was deducted in a previous year and that deduction reduced taxable income, the refund is considered taxable income in the year it is received to the extent of the original deduction's tax benefit.

Match Each Statement with the Correct Term Below