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CHAPTER 4Student: ___________________________________________________________________________1.The realization requirement gives an incentive to own assets that have increased in value and to sell assets whose value has decreased.TrueFalse2.A sole proprietorship purchased an asset for $1,000 in 2012 and its value was $1,500 at the end of 2012. In 2013, the sole proprietorship sold the asset for $1,400. The sole proprietorship realized a taxable gain of $400 in 2013 but an economic loss of $100 in 2013.TrueFalse3.Judy is a cash basis attorney. In 2012, she performed services in connection with the formation of a corporation and received stock with a value of $4,000 for her services. By the end of the year, the value of the stock had decreased to $2,000. She continued to hold the stock. Judy must recognize $4,000 of gross income from the stock for 2012.TrueFalse4.Barney painted his house which saved him $3,000. According to the realization requirement, Barney must recognize $3,000 of income.TrueFalse5.Nicholas owned stock that decreased in value by $20,000 during the year, but he did not sell the stock. He earned $45,000 salary, but received only $34,000 because $11,000 in taxes were withheld. Nicholas saved $10,000 of his salary and used the remainder for personal living expenses. Nicholas's economic income for the year exceeded his gross income for tax purposes.TrueFalse6.The fact that the accounting method the taxpayer u

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