Judy is a cash basis attorney.In 2010,she performed services in connection with the formation of a corporation and received stock with a value of $3,000 for her services.By the end of the year,the value of the stock had decreased to $1,000.She continued to hold the stock.Judy must recognize $3,000 of gross income from the stock for 2010.

Question

Quizplus · Accepted Answer

As a cash basis taxpayer, Judy recognizes income when she receives it. In this case, she received stock with a value of $3,000 as payment for her services, which she must recognize as gross income for 2010. The subsequent decrease in value does not affect her initial recognition of income.

Judy Is a Cash Basis Attorney