Question

Hillary is a cash-basis calendar-year taxpayer. During the last week of December she received a letter containing a $5,000 check for services. Which of the following is a true statement?A. Hillary is taxed on the $5,000 of service income in the year she cashes the check.B. Hillary is taxed on the $5,000 of service income in the year the check was mailed.C. Hillary is taxed on the $5,000 of service income in the year she receives the check.D. Hillary is taxed on the $5,000 of service income in the year she provides the services.E. None of these is true.

Answer 1

Answer:

Option C

Explanation:

It is given that the Hillary has received the check of $ 5,000 on the last week of the December.

Therefore,

Under constructive receipt she is taxed on income at the time the check is received or made available to Hillary i.e on the last year.

Thus, She will be taxed on $ 5000 for the last year

Hence, the correct answer is option (C)