Question

Dave is a plumber who uses the cash method of accounting. This year Dave requested that his clients make their checks payable to his son, Steve. This year Steve received checks in the amount of $72,750 for Dave's plumbing services. Which of the following is a true statement?
a. Steve is taxed on $72.750 of plumbing income this year
b. None of the choices are correct.
c. Dave may deduct the $72,750 received by Steve.
d. Steve is taxed on $72,750 of income from gifts received this year
e. Dave is taxed on $72,750 of plumbing income this year.

Answer 1

Answer:

e. Dave is taxed on $72,750 of plumbing income this year.

Explanation:

Based on the information given if Dave clients make their checks payable to his son, Steve based on Dave request in which the son, Steve received checks of $72,750 on behalf of his Dad, Dave's plumbing services, the TRUE STATEMENT will be DAVE IS TAXED ON $72,750 OF PLUMBING INCOME THIS YEAR reason been that to assign income to another person is NOT EFFECTIVE for TAX PURPOSES.