The principle of realization for tax purposes is very different from realization as it is understood for financial reporting purposes.Realization is similar for both tax and financial accounting.

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The principle of realization is different for tax and financial reporting purposes. In financial reporting, revenue or gains are realized when they are earned, realized or realizable, and all important elements of the transaction can be reliably measured. In contrast, for tax purposes, realization occurs only when the proceeds of a transaction are actually received or when a reasonable expectation of receiving proceeds exists.

The Principle of Realization for Tax Purposes Is Very Different