Determine whether the taxpayer in each of the following situations has realized income. Explain why there has or has not been a realization, and determine the amount of income to be reported.
a. Alfredo owns a one-third interest in Bayou Partnership. During the current year, Bayou’s taxable income is $45,000.
b. Janet owns a pest-control service. She charges customers $50 per month for basic pest control. Alternatively, customers can pay a lump sum of $500 for one year of basic monthly pest control. During the current year, Janet receives $13,000 in monthly payments and $26,000 in 1-year prepayments.
c. Monte owns 1,000 shares of Ali, Inc., common stock. During the current year, Ali declares and distributes a 20% stock dividend. As a result, Monte receives an addi- tional 200 shares of stock.
d. Rogers Trucking Company owes Big Truck Sales, Inc., $200,000 for the purchase of 3 trucks. Rogers is having a bad year and is unable to make full payment on the debt to Big Truck. Rather than foreclose on Rogers, Big Truck reduces the debt to $170,000 so that Rogers can stay in business.