1. What Is Income?

In each of the following situations, indicate whether taxable in-come should be recognized.

1. 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.
2. R, a long-time employee of XYZ Inc., purchased one of the companys cars worth $7,000 for $3,000.
3. 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 purposes. The rental value of the car is $350 per month.

2. Constructive Receipt

For each of the following situations, indicate whether the taxpayer has constructively received the income.

1. R received a bonus as top salesperson of the year. He received the check for $25,000 at 10 p.m. on December 31 at a New Years Eve party. All the banks were closed.
2. On January 3, D received the check for Januarys rent of her duplex. The envelope was postmarked December 31.
3. On December 25, C Corporation rewarded its top executive, E, with 100 shares of stock for a job well done. E was unable to find a buyer until March 15 of the following year.

d. Immediately after receiving her check on December 31, Z went to her employers bank to cash it. The bank would not cash it since the employers account was overdrawn.

3. Cash Method Eligibility

Given the facts below, indicate whether the taxpayer may use the cash method for 2021 in the following situations.

1. Sweatshirt Corporation, a publicly traded corporation. Annual gross receipts for 2018 and previous years were $18 million annually; gross receipts for 2019 were $24 million; and for 2020, $36 million.
2. Dewey, Cheatham, and Howe, a national public accounting firm, operated as a partnership. Annual gross receipts for the past five years have exceeded $50 million.
3. McSwane, McMillan, and McClain, Inc., an architectural firm, operated as a regular C corporation. Annual gross receipts for the past two years have exceeded $7 million. McSwane, McMillan, and McClain own all of the stock and perform services for the firm.
4. Buttons and Bows, Inc., an S corporation.
5. A trust established for John Doe.
6. Plantation Office Park, a publicly traded limited partnership: annual gross receipts have never exceeded $2 million. The partnership is a tax shelter.