Concepts Beneficial to the IRS's vs. the Taxpayer's Point of View

Discussion Questions
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Response to Question 1
Realized income: this is income which is regarded as received or earned. It is not essentially taxable whenever it is realized. This is most beneficial from the point of view of the taxpayer since it is not taxable (Spaulding, 2011). Recognized income: whenever realized income becomes taxable income, then it is considered as recognized income. This is most beneficial from the IRS’s viewpoint since this type of income is recognized by the tax code as taxable income and it has to be reported that way for the tax year in which it is recognized. Return of capital doctrine: this stipulates that the earnings from a sale are not income to the extent of the taxpayer’s investment or cost in the asset. In order to maximize revenues, the government may demand for the return of capital to take place at the ending of the collection (Spaulding, 2011). This is most beneficial from the taxpayer’s point of view who usually prefer for the return of capital to take place at the start of the collection period in order to enable them to postpone recognizing income which they obtain from the transaction.
Constructive receipt: this doctrine specifies that income is received whenever it is available to the taxpayer devoid of any restrictions or limitations. A taxpayer has to recognize income whenever the income is credited to the taxpayer’s account. This is most beneficial from the taxpayer’s viewpoint since the taxpayer only has to report income when it is constructively received (Spaulding, 2011). Tax benefit rule: this rule provides that if an individual claims a deduction for a particular item in a given year and in the next year recovers part of, or the entire amount deducted, the recovery is incorporated in income in the year received. The sum which is included in income is limited to the amount of tax benefit by the deduction (Spaulding, 2011). This is most beneficial to the taxpayer’s viewpoint who will enjoy tax deduction.
Response to Question 2
The expenditure that is deductible as ordinary is $40,000 given that it is the amount that is usual or customary within the industry of accounting services. It is of note that other accounting companies were willing to offer Joshua the same accou...