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Respondent’s determination of a deficiency is sustained to the
extent it is based on the interest adjustments here described.
V. Real Estate Activities
A. Income
Petitioner argues that she is a “cash basis” taxpayer and
does not owe taxes on money that was not received. She states
that she managed property for people and, “[i]n order to build
a[n] investment program for herself, she took a[n] interest in
the property instead of a management fee.” It is unclear exactly
what error petitioner is ascribing to respondent. Petitioner may
misunderstand the term “cash basis”. The cash receipts and
disbursements method of accounting (cash method) is a permissible
method of accounting. See sec. 446(c)(1). Generally, under the
cash method, all items that constitute gross income, “whether in
the form of cash, property, or services” (emphasis added), are
includable in gross income for the taxable year in which
received. Sec. 1.446-1(c)(1)(i), Income Tax Regs. With certain
exceptions not here relevant, “if services are paid for in
property, the fair market value of the property taken in payment
must be included in income as compensation”. Sec. 1.61-2(d)(1),
Income Tax Regs. Petitioner has shown no error in respondent’s
adjustments increasing petitioner’s income on account of
compensation received in forms other than cash payments.
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