The Cash Method of Accounting for Income Tax Purposes

question 101

Multiple Choice

The cash method of accounting for income tax purposes
I.is allowed for interest received from Series EE savings bonds.
II.requires a taxpayer who receives services from another taxpayer in exchange for property to include the value of the services in income.
III.is allowed for taxpayers who receive interest income from the issuance of original issue discount securities with a term of more than one year.
​

• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Only statement III is correct.
• D)Only statements I and II are correct.
• E)Statements I, II, and III are correct.

---

Definitions:

Payor Bank

A bank that is responsible for paying the checks or drafts of the person or entity that holds an account with them.

Drawn

Refers to the process of creating or producing something, usually in the context of drafting legal documents or pulling a negotiable instrument like a check.

Endorsement

The act of publicly supporting or approving something, or a legal amendment to a document or agreement, often seen in insurance policies or bank checks.

Forged

Created, altered, or imitated with the intent to deceive; typically refers to documents, signatures, or art.