In Which of the Following Situations Does the Taxpayer Have

question 63

Multiple Choice

In which of the following situations does the taxpayer have a claim of right to the payment received?
I.Ellen is on the Carlyle city council. She accepts $5,000 from a contractor who is seeking rezoning of his land before the commission on the condition that Ellen supports the rezoning. The payment is illegal under state law and Ellen will have to repay the $5,000 if the arrangement with the contractor is discovered.
II.Alan's automobile is damaged in an automobile accident. Because he uses the automobile in his job, his employer gives him $4,000 to have the car repaired. The employer will withhold $100 per paycheck until the $4,000 is repaid.
​

• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

---

Definitions:

Separate Income Tax Returns

Tax documents filed by individuals or entities separately, as opposed to joint or consolidated filings.

Separate Return Method

A tax filing strategy used by businesses operating in multiple states or countries, where each entity files its own tax return rather than a consolidated return for the entire group.

Income Tax Expense

The total amount of income tax owed to federal, state, and local tax authorities for the period.

Net Operating Loss Carryforward

A tax provision that allows a company to apply a fiscal year's net operating losses to future years' profits in order to reduce taxable income.