Final answer:
The concept described is known as 'constructive receipt,' which is crucial for determining when income must be reported for tax purposes. Taxable income is based on adjusted gross income minus deductions and exemptions, with various tax rates, credits, and alternative minimum tax potentially affecting tax liability.
Step-by-step explanation:
The concept in question refers to constructive receipt, which is deemed to occur when the income has been credited to the taxpayer's account or when the income is unconditionally available to the taxpayer, the taxpayer is aware of the availability, and there are no restrictions on the income. This is a significant concept in taxation because it determines the timing of when income must be included for tax purposes.
Taxable income is calculated as adjusted gross income minus any deductions and exemptions. Various tax rates apply to different income levels. Tax credits and the alternative minimum tax can also affect the total tax liability. Taxpayers need to stay informed of their income levels and potential tax obligations as they arise.
National income encompasses all income earned, including wages, profits, rent, and profit income. It is essential to differentiate between income that is constructively received and still in inventory and not yet realized. Therefore, even if an inventory good has been produced but not sold, it may not be included in taxable income until it is realized.