All Events Test

Thanks for sharing!
exam paperImage source: openclipart.org

When you use an accrual method of accounting, your financial statements reflect that you recognize income when you earn it and expenses when you incur them. The all events test is a standard for determining when an item of income or expense should be included on your income tax return.

Income inclusion is covered in Regulation 1.451-1(a), and requires you to recognize income under an accrual method based on the right to receive the income and the ability to determine the amount of the income to be received.

For deductions, there’s another requirement: you must also have actually delivered the property or performed the service. The all events test for deductions is found in Regulation 1.461-1(a)(2), which also allows an exception for recurring items.

***

Other posts you might enjoy

Definitions — Not so strictly confidential Image source: Public domain via Wikimedia Commons   You've probably heard the old joke about life's two rules. The first one is to never give out all the information. That's a rule the IRS follows and most of the time you're probably happy they do. But for identity theft victims, the ...
Definitions — Paying the piper Image source: Edmund Evans, Public domain, via Wikimedia Commons   Whether you believe the expression comes from the Pied Piper of legend or the old proverb, paying the piper does not always mean you get to call the tune. Sometimes the one who makes the rules gets to choose the music. Th...
Definition — Fun with statistics Image source: openclipart.org Keep calm, it's only statistics, and according to author Rex Stout, there are only two kinds – the kind you make up and the kind you look up. The IRS generates statistics (presumably of the second kind) at a heady pace, and the Spring 2017 Statistics of Income Bulle...
Definitions — The great depreciation   Section 179 depreciation, a tax provision that currently allows taxpayers to write-off up to $500,000 for 2016 ($510,000 for 2017), has been around long enough that you may think you're very familiar with the rules. Here's a quiz to check your knowledge. 1. In what year was section 1...
Posted in Taxing Definitions Tagged with: , , ,