Judy is a cash basis attorney.This year, she performed services in connection with the formation of a corporation and received stock with a value of $4,000 for her services.By the end of the year, the value of the stock had decreased to $2,000.She continued to hold the stock.Judy must recognize $4,000 of gross income from the stock for the current year.

Question

Quizplus · Accepted Answer

Even though the value of the stock decreased by the end of the year, under cash basis accounting, Judy must recognize the full value of the stock ($4,000) as gross income in the year she received it in exchange for her services. The fluctuation in value after that point is irrelevant for tax purposes.

Judy Is a Cash Basis Attorney