Final answer:
Not all realized gains are recognized for tax purposes and included in gross income; this only happens when the asset is sold or disposed of. Gross income calculations for tax purposes involve subtracting deductions and exemptions from adjusted gross income, resulting in taxable income.
Step-by-step explanation:
Not all realized gains are recognized for tax purposes, which means they are not always included in gross income. When a business has an inventory good that has been produced but not yet sold, it does not count as a realized gain. Realized gains are typically recognized when the asset is sold or disposed of, and the gain can be measured. National income includes all income earned, such as wages, profits, rent, and profit income, but that is more of an economic concept rather than a tax principle.
The calculation for taxable income is: taxable income = adjusted gross income - (deductions and exemptions). After determining taxable income, different tax rates apply to different income levels, and tax credits or alternative minimum tax may also factor into the final amount of tax owed by an individual or business.