Tax Law Essay Example | Topics and Well Written Essays - 750 words

Tax Law - Essay Example Realized income is the money generated from normal business processes, and also additional cash generating issues like investment earnings. Recognized income entails recognizing revenue which is both received and earned. Revenue is recognized after the occurrence of significant transactions. Credit sales are not recognized income unless the business is adequately sure of getting payments. Return of capital illustrates investment returns that are not viewed as income. It illustrates when the total invested amount, is paid back to the investor. Investors are not taxed in return of capital unless the initial investment value is exceeded. Constructive receipt is applied to illustrate if the cash-basis taxpayer got the gross income. The taxpayer is taxed in the present year if he has adequate control in the determination of whether the income items will be paid. The tax benefit rule explains that if the taxpayer recovers loss and expense which was written off in the last year income, then the included value should be added to the present year’s gross income. Wherewithal to pay concept explains that tax collected must be done when the taxpayer can effectively and efficiently pay it. For example, appreciation in property values should be taxed in the tax transaction. The beneficial concept to the taxpayer is the return of capital concept because it ensures easy recovery of invested amount. The beneficial doctrine to the internal revenue department is the tax benefit rule; because it increases the gross income for taxation purposes.