Determine the effects of the following on a cash basis taxpayer\'s gross income

Question

Determine the effects of the following on a cash basis taxpayer's gross income for 2018 and 2019. If an amount is zero, enter "0".

Gross Income
2018 Gross Income
2019 a. On December 31, 2018, the taxpayer received a $1,500 check from a customer. The taxpayer did not cash the check until January 3, 2019. $ $ b. On December 31, 2018, the taxpayer received a $1,500 check from a customer. The customer asked the taxpayer not to cash the check until January 3, 2019, after the customer's salary check could be deposited. $ $ c. On December 31, 2018, the taxpayer received a $1,500 check from a customer. The check was not received until after the bank had closed on December 31, 2018. The taxpayer did not cash the check until January 3, 2019. $ $

Explanation / Answer

Gross Income 2018 Gross Income 2019 a The taxpayer received the check on 31 Dec 2018 but did not cash the check until Jan 3, 2019 $1,500 $0 on the basis of constructive receipt b The taxpayer received the check on 31 Dec 2018 but did not cash the check until Jan 3, 2019 as the customer asked not to cash until Jan 3, 2019 $0 $1,500 Check is received but with restriction to not cash it until 3 Jan 2019, thus the receipt will be in 2019, when there will be no restriction c The taxpayer received the check on 31 Dec 2018 but after the banking hours $0 $1,500 the check is constructively received in 2019 as it is received after bank had closed on 31 Dec 2018

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