McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 28

Although Hank is retired, he is an excellent handyman and often works part-time on small projects for neighbors and friends.Last week his neighbor, Mike, offered to pay Hank $500 for minor repairs to his house.Hank completed the repairs in December of this year.Hank uses the cash method of accounting and is a calendar-year taxpayer.Compute Hank's gross income for this year from each of the following alternative transactions:
a.Mike paid Hank $200 in cash in December of this year and promised to pay the remaining $300 with interest in three months.b.Mike paid Hank $100 in cash in December of this year and gave him a negotiable promissory note for $400 due in three months with interest.Hank sold the note in January for $350.c.Mike gave Hank tickets in December to the big game in January.The tickets have a face value of $50 but Hank could sell them for $400.Hank went to the game with his son.d.Mike bought Hank a new set of snow tires.The tires typically sell for $500, but Mike bought them on sale for $450.