Exercise 4-5 (Algorithmic) (LO. 9) Leilel operates a sole proprietorship, using the accrual basis of tax accounting. Last year, she claimed a $32,125 bad debt deduction for a receivable from Jackie. But this year, Jackle sent her a check for $22,488, which Leilei accepted in full satisfaction of the receivable. How much gross income does Leilei record for the item this year? 21,368 X Feedback Check My Work An important tax concept is the tax benefit rule. In certain situations, taxpayers must determine the extent to which receipts can be excluded under the tax benefit rule. Exercise 4-1 (Algorithmic) (LO. 3) Champ received a $50,400 distribution from NeatCo, a U.S. C corporation. NeatCo's earnings and profits for the year totaled $30,240. How much dividend income does Champ recognize? 50,000 X Feedback Check My Work A corporation is taxed on its earnings, and the shareholders are taxed on the dividends paid to them from the corporation's after-tax earnings. Partial relief from the double taxation of dividends has been provided in that "qualified dividends" are taxed at special rates