Question

Question 9 (1 point) An accrual basis taxpayer receives an advanced payment for services to be performed over the next three years. The taxpayer reports the payments in gross income over the years as the services are rendered over the next three years. 1) True 2) False Question 10 (1 point) When a person receives compensation in the form of noncash property, the person is includes the fair market value of the property in gross income. 1) True 2) False Question 11 (1 point) The recipient spouse of a property settlement is taxed on the fair market value of the property received 1) True 2) False

Answer 1

9.

Answer: False

This should not be recorded as income of this year, since its performance obligation is pending yet. As per the revenue recognition principle, an advance receipt in respect of future performance is not the revenue of current period; rather, it should be recorded as unearned revenue in the liability side of Balance sheet.

10.

Answer: True

It becomes true, since fair market value indicates the property value of compensation that is taxable to the person (employee); although, it is deductible from the income of provider (employer).

11.

Answer: False

Property settlement is not taxable until such property is sold by the recipient. It is treated as deferred till the later sale is made.