Match Each Statement with the Correct Term Below

question 97

Multiple Choice

Match each statement with the correct term below.
-Capital Recovery Concept

• 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:

Social Security

A U.S. government program that provides retirement, disability, and survivors' benefits funded through payroll taxes.

Form W-2

Form W-2 is an IRS tax form used in the United States to report wages paid to employees and the taxes withheld from them.

Gross Wages

The total amount of an employee's earnings before any deductions are made for taxes, benefits, and other payroll withholdings.

Tax Withholdings

Amounts of money withheld from an employee's salary by an employer for payment of taxes.