Question

In week 6 case, What standard do you use for non-monetary transactions? Wgen Catherine traded with the local magazine, what was the effect on taxable income?

Answer 1

The fair value of the assets exchanged is used as the standard for non-monetary transactions. The effect on taxable income depends on the relative fair values of the assets exchanged.

Step-by-step explanation:

For non-monetary transactions, the standard used is the fair value of the asset being exchanged. This means that the value of the asset being given up and the value of the asset received are considered in determining the taxable income. When Catherine traded with the local magazine, the effect on taxable income would depend on the fair value of the asset Catherine gave up and the fair value of the magazine she received. If the fair value of the magazine received is higher than the fair value of the asset given up, Catherine may have a higher taxable income. If the fair value of the magazine received is lower than the fair value of the asset given up, Catherine may have a lower taxable income.