NAME : 7. Mike is an employee of ABC Co. In December of 2017. ABC indicated that

Question

NAME : 7. Mike is an employee of ABC Co. In December of 2017. ABC indicated that it would supplemen Mike is an employee of ABC Co. in Den all employees' compensation with an annual bonus and that the annual bonus for pick up on December 30th. Checks were drafted and ready to be picked up by employees on December 30, 2017 but Mike was on vacation from becer 17 but Mike was on vacation from December 23 through January 2, 2018 and did not pick up his check. With respect to 8 and did not pick up his check. With respect to Mike's annual bonus check: a. Mike was on vacation and therefore since IMIK acation and therefore since Mike is a cash basis taxpayer and he could not 18. the annual bonus should not be included as pick up his check until his return in 2018, the annual bonus should not be ich 2017 gross income to Mike couldn't have cashed or deposited the Check when it was made available on December 30, 2017 therefore the annual bonus check should not be included as 2017 gross income. C. Mike's annual bonus check was available prior to the 2017 year's end and Mike 5 decision not to pick up the check does not permit Mike to defer his receipt of income until 2018 when he returned from his vacation - the annual bonus check must be included in Mike's 2017 gross income d. None of the above 8. Ed owns are auto repair shop specializing in Italian sport car repair. Ed's tax attorney Stan, a self-employed attorney, just purchased a 1970 Ferrari 365 Daytona coupe in need of regularly scheduled maintenance. Ed usually pays Stan $10,000 per year to prepare his income and other i tax returns. Ed, after checking the Ferrari, offers to perform the regularly scheduled maintenance on the Ferrari for 2018 in exchange for Stan doing Ed's tax returns in 2018. Stan agrees to that understanding for 2018. a. Ed and Stan have no gross income in 2018 from their agreement as both Ed and Stan are cash basis taxpayer no cash was exchanged. Stan has income because his fees from Ed in 2018 would have been $10,000 and no value was explicitly agreed to for the work Ed will perform on the Ferrari Ed has no income from this agreement in 2018. C. Ed and Stan have gross income of $10,000 for 2018 d. None of the above. 9. Prizes are included in gross income regardless of whether the recipient assigns the prize or reward to a government agency or tax exempt charitable organization. a. True b. False 10. In order for a prize to be assigned and excluded from the income of the recipient of the prize or award, the recipient of the award: a. Must have been selected without any action on the recipient's part b. Must have not be required to render any substantial future services as a condition to receiving the prize or award C. Both a and b above d. Either a or b above

Explanation / Answer

Part 7: Option (C) is the correct answer, because income has already accrued in 2017, Mike cannot defer his income just because he did not pick his cheque.

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