Carlotta Finds a Chest Inscribed "Sinbad" That Contains $250,000 of Cash

question 58

Multiple Choice

Carlotta finds a chest inscribed "Sinbad" that contains $250,000 of cash while diving among the coral reefs off the Virgin Islands. The US Customs and the DEA deny knowledge of the cash, so Carlotta keeps it.
I.Carlotta would not recognize any gross income if the chest contained jewels valued at $250,000, rather than the cash.
II.Recognition is necessary because Carlotta has an increase in wealth.
III.Recognition will not occur because the windfall would not be considered as derived from capital or from labor.
IV.The All-inclusive Income Concept explains the recognition of the cash as income.
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• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Only statements I and IV are correct.
• D)Only statements I, II, and IV are correct.
• E)Only statements II, III, and IV are correct.

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Definitions:

Nonslaveowning Farmers

Agricultural workers or landowners who did not own slaves, common in 19th century America, particularly in the North and among smaller farms in the South.

Yeoman Farmer

An independent farmer who generally owned and worked a small plot of land, significant in American folklore as an embodiment of self-reliance and democratic ideals.

Cotton

A natural fiber obtained from the seeds of the cotton plant, widely used in textile manufacturing.

Cash Crop

A crop grown for the purpose of being sold on the market to generate profit rather than for the farmer's own use or consumption.