Asked by Michael McGuire on May 22, 2024
Verified
In general,an individual must recognize income on his or her tax return if the transaction has economic benefit,the transaction has reached a conclusion and the income from the transaction is tax-exempt income.
Tax-Exempt Income
Income that is not subject to tax by federal, state, or local authorities, allowing the recipient to keep the full amount.
Recognize Income
The process of reporting income when it is earned, according to accounting principles, regardless of when it is received.
- Ascertain the situations prompting income declaration by a taxpayer and the impact of economic rewards on taxation levels.
Verified Answer
SP
Sankalp PatelMay 27, 2024
Final Answer :
False
Explanation :
Income must be recognized if it has economic benefit and has reached a conclusion, but tax-exempt income (such as certain municipal bond interest) does not need to be recognized on a tax return as taxable income.
Learning Objectives
- Ascertain the situations prompting income declaration by a taxpayer and the impact of economic rewards on taxation levels.