Question

Lee, an attorney, uses the cash receipts and disbursements method of reporting. A client gave Lee 500 shares of a listed corporation's stock in full satisfaction of a $10,000 legal fee the client owed to Lee. This stock had a fair market value of $8,000 on the date it was given to Lee. The client's basis for this stock was $6,000. Lee sold the stock for cash the next year. In Lee's income tax return, what amount of income should be reported in connection with the receipt of the stock

Answer 1

Answer:

$8,000

Explanation:

Based on the information given we were told that the stock had a FAIR MARKET VALUE of the amount of $8,000 on the date it was given to Lee which therefore means that In Lee's income tax return, the amount of INCOME that should be reported in connection with the receipt of the stock will be the FAIR MARKET VALUE of the amount of $8,000.