ACCT 485 Lecture Notes - Lecture 4: Advance Payment, Retained Earnings, Foreign Corporation
20 Sep 2016
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Acct 485 lecture 4: defining and accounting for gross income. Irc 61(a) [a]ll income from whatever source derived . Economic concept of income: any appreciation in wealth. Accounting/tax concept of income: adopts the realization principle, whereby income is taxed when realized. Realization occurs when: some form of exchange has taken place, and, the consideration received in the exchange (e. g. , good, services, etc. ) can be valued. Recovery of basis : recovery of capital doctrine. Realized vs. recognized : realized: what i got (actual, recognized: gain or loss. Taxable year: importance of taxable year determination, tax year is important: marginal tax rates, status change, and deductions. Method of accounting: three basic methods: Combination of cash and accrual: uses of various methods, adoption of accounting method. Income is recognized in the year in which it is actually or constructively received in cash or cash equivalent. Exceptions: original issue discount ( oid , amount received under an obligation to repay.
