For Each Tax Treatment Described Below,explain the Income Tax Concept(s)which

question 33

Essay

For each tax treatment described below,explain the income tax concept(s)which is (are)responsible for the treatment.
a.Atlas Construction Inc. ,an accrual basis taxpayer,billed a client $12,000 for services performed in December 2017.In March 2018,Atlas Construction receives a check from the client for $10,000.Included with the check is a letter indicating that some of the services had not been performed to specifications.After investigating the matter,Atlas Construction determined that the customer was right and corrected its account receivable with the client.Atlas Construction must include $12,000 in its 2017 income and takes a deduction for $2,000 in 2018.
b.Katie is the Mayor of Coal Creek.During the current year,she accepts $5,000 from a local banker for her promise that the banker would receive the contract for a new city bond issue.The payment is illegal under state law and will have to be returned if discovered.Katie must include the $5,000 in her gross income.
c.Little Company purchased machinery in 2012 at a cost of $40,000.In 2012 through 2017,Little properly deducts $14,000 in depreciation on the machinery.In 2017,the machinery is sold for $20,000.Little is allowed to deduct a $6,000 loss on the sale of the machinery.
d.In 2017 Raptor Corporation properly deducted a $5,000 expense it paid to Colfax Inc.In 2018 Raptor receives a $500 check from Colfax.A letter accompanying the check indicates that Colfax overcharged Raptor and the $500 refund was made to correct the overcharge.Raptor must include the $500 in its 2017 gross income.