A medical doctor incorporates her medical practice, which is operated as a sole proprietorship. The proprietorship uses the cash method of accounting. Among the assets contributed to the new corporation are unrealized receivables worth $40,000. The receivables are collected by the corporation. Which of the following statements is correct?

Select one:

a.

The $40,000 of receivables is included as ordinary income on the doctor's personal income tax return when collected by the corporation.

b.

The doctor must include the $40,000 as ordinary income in her personal income tax return at the time of incorporation.

c.

The $40,000 of receivables is included as ordinary income in the corporation's income tax return at the time of incorporation.

d.

The $40,000 of receivables is included as ordinary income in the corporation's income tax return when collected.