What is the definition of noncash income?

Noncash income refers to income that does not involve actual cash transactions but can still have substantial value. This definition aligns with the concept of Fair Market Value (FMV), which is the price at which a willing buyer and a willing seller would agree to transact for the asset in question.

When individuals or businesses receive services, benefits, or property instead of cash, the value of these noncash items is often measured and reported based on FMV. For example, if an individual receives a service such as legal counsel, that service can be assigned a monetary value even though no cash changes hands. This principle is significant in tax law because the IRS requires that noncash income be reported as income, reflecting its value.

Other options do not encapsulate the comprehensive definition of noncash income. While services provided can represent income, they do not define it entirely. Noncash income is indeed reported on tax returns; it is simply accounted for in a different form. Lastly, while income can arise from selling assets, noncash income encompasses a broader range of items beyond just sale proceeds.