T wins a door prize as the one-thousandth customer walking through the door of his favorite coffee shop. He is given a choice of $1,000 in cash or a cappuccino machine (which cost the shop $1,000, but has a retail value of $1,500). T chooses the machine. a. T has realized at least $1,000 of income. b. T will recognize income only if and when he sells the machine. c. Both (a) and (b) are correct. d. None of the above.
T wins a door prize as the one-thousandth customer walking through the door of his favorite
coffee shop. He is given a choice of $1,000 in cash or a cappuccino machine
(which cost the shop $1,000, but has a retail value of $1,500). T chooses the machine.
a. T has realized at least $1,000 of income.
b. T will recognize income only if and when he sells the machine.
c. Both (a) and (b) are correct.
d. None of the above.
T bought an antique desk and chair from her employer for $50 in Year 1 when the firm
bought all new office furniture. The desk and chair had a fair market value of $500.
The property increases in value to $700 in Year 2, and T sells it for $900 in Year 3.
a. T has realized income of $450 in Year 1 only if the difference between the
value of the items and their price was intended as compensation.
b. T will realize income of $450 in Year 1 regardless of her employer’s motive.
c. T will realize income in Year 2 because the property has increased in value.
d. None of the above
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