The Claim-Of-Right Doctrine I.explains Why Carla Does Not Report $10,000 of Income on of Income

question 147

Multiple Choice

The Claim-of-Right Doctrine
I.explains why Carla does not report $10,000 of income on her tax return when she borrows $10,000 from the First Savings Bank.
II.differs from the constructive receipt doctrine in that constructive receipt applies where an amount has been received, and the tax question is whether the amount is taxable in the current year.
III.explains why Samuel reports $45 of interest credited to his savings account on December 31, 2018, on his 2017 tax return, even though he does not actually receive the cash in 2018.
IV.applies when a taxpayer has no definitive obligation to repay the amount received.
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• A)Statements I and IV are correct.
• B)Statements II and III are correct.
• C)Statements II and IV are correct.
• D)Statements I and III are correct.
• E)Statements II, III, and IV are correct.

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Definitions:

Working Capital

The difference between a company's current assets and its current liabilities.

Straight-Line Depreciation

A method of calculating the depreciation of an asset, where the asset's cost is evenly spread over its useful life.

Net Present Value

A financial analysis method used to determine the value of an investment by calculating the present value of its future cash flows.

Straight-Line Depreciation

An approach for assigning the financial outlay of a concrete asset throughout its service life in uniform annual segments.