Match Each Statement with the Correct Term Below

question 48

Multiple Choice

Match each statement with the correct term below.
-Recognition

• A)Taxpayer reports income when received in cash or its equivalent and takes deductions as they are paid.
• B)A deduction taken in one year that is recovered in a later year is reported as income in the year of recovery to the extent that the deduction reduced taxable income.
• C)Taxpayer reports income as earned and deductions as incurred.
• D)The result of an arms-length transaction.
• E)Exclusions and deductions result from specific acts of Congress that must be strictly applied and interpreted.
• F)The taxability of a transaction is determined by the reality of the transaction rather than some contrived appearance.
• G)The reporting of an item of income or expense on a tax return
• H)No income is realized until the taxpayer's invested capital is recovered.
• I)All income received is taxable unless some specific provision of the tax law allows exclusion of the item.
• J)These taxpayers are not deemed to transact at arms-length.

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Definitions:

Personally Profit

Gaining financial or material benefit for oneself from a situation or activity, often at the expense of ethics or other obligations.

Partnership Transaction

A business operation or deal undertaken by a partnership that is in line with the objectives and interests of the business.

Good Faith

Acting with honest intentions without seeking to take unfair advantage of another.

Intentional Torts

Intentional torts are wrongful acts done on purpose to harm another person, as opposed to accidentally, and can lead to civil liability.