Hillary is a cash-basis calendar-year taxpayer.During the last week of December she received a letter containing a $5,000 check for services.Which of the following is a true statement?

Question

Quizplus · Accepted Answer

Hillary is a cash-basis taxpayer, meaning she reports income when it is received. In this case, she received the $5,000 check in the last week of December, so she must report it as income in that tax year. The fact that she did not cash the check until the next year is irrelevant. Option E is technically true under the doctrine of constructive receipt, but it does not apply in this case since Hillary did physically receive the check in the same year.

Hillary Is a Cash-Basis Calendar-Year Taxpayer