What is income? in each of the following situations indicate whether taxable income should be recognized....

What is income? in each of the following situations indicate whether taxable income should be recognized. a) Q purchased an older home for 30,000. Shortly after its purchase, the area in which it was located was designated a historical neighborhood, causing its value to rise to 50,000 b) R, a long term employee of XYC, purchased one of the company's cars worth 7,000 for 3,000. c) I borrowed 10,000 secured by property that had an adjusted basis of 3,000 and a fair market value of 15,000 d)S, a 60% shareholder in STV Corporation, uses a company car 70% of the time for business and 30% for personal purporses. The rental value of the car is 350 per month

Expert Solution

Income is money that an individual or business receives in exchange for providing goods and/or services or through investments. Income can be which has been received or which has earned but not receive.

In accounting, we consider only that income which has been realised and not unrealised income.

Taxability of the following

A) cost to purchase the house is 30,000 and Current value is 50,000. there is a unrealised gain on the house is 20,000. but it won't be considered for tax as it has not been realised yet.

B) Mr. R has purchased a company's car worth 7,000 for 3,000, in this case difference i.e. 4,000 would be considered as perquisit and would be taxable in the hands of Mr R.

C) borrowing is not a income as it is paid back after some time with interest. hence borrowing of 10,000 won't be considered as income.

D) Mr S uses a company car 70% for business and 30% for personal purpose. monthly rent of car is 350. in this case, 350*30% i.e. 105 would be considered as perquisit and would be taxable in the hands of Mr S.

ekkarill92 answered 2 years ago

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