To: Chico Facts: Chico is an accrual basis corporation operating in several states. Chico received a income tax refund in Year 4. Issue: When should Chico recognized the refund as gross income? Conclusion: Chico will have to recognize the refund as gross income in year 3- received notice that the refund was approved. The gross income does not exist for an accrual-based taxpayer before the occurrence of the event. Authorities 451(a) Analysis and Summary: Chico will have to recognize the refund as gross income in year 3-received notice that the refund was approved. The gross income does not exist for an accrual-based taxpayer before the occurrence of the event