Stanley is a cash-method taxpayer who reports on a calendar-year basis. This yea

Question

Stanley is a cash-method taxpayer who reports on a calendar-year basis.

This year his employer, ABC Corporation, has decided to pay Stanley a    

year-end bonus of $3,000. Determine the amount that Stanley should      

include in his gross income this year under the following circumstances:

a.         ABC Corporation wrote the bonus check and put it in Stanley's

            office mail slot on December 31. Stanley did not stop by the

            office and pick up the check until after year end.

b.         Stanley picked up the check in December, but the check

            was postdated January 2.

c.         The bookkeeper mistakenly wrote the check for $300 instead

            of $3,000. Stanley received the remaining $2,700 on

            January 4.

d.         ABC Corporation mailed the check to Stanley before the end

            of the year. Even though Stanley was anticipating the bonus

            payment, he was on vacation and did not collect his mail

            until after year-end.

Explanation / Answer

Cash method accounting. Therefore for part a), the $3,000 bonus check is not recognised in his gross income for that year as he is yet to receive the cash. For b) its also not recognised as although he picked up the check in December, it is postdated to next year January. c) Additional gross income for that year is only $300. The remaining $2,700 would be included under his gross income for the following year. d) No additional gross income as he did not collect his mail before year-end.

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