1. Has the taxpayer in each of the following situations received taxable income? If so, when should the income be recognized? Explain.
a. Charlotte is a lawyer who specializes in drafting wills. She wants to give her husband a new gazebo for Christmas. In November, she makes a deal with Joe, a local handyman, to build a gazebo. In return, Charlotte is to draft a will for Joe's father. The gazebo normally would cost $3,000, which is approximately what Charlotte would charge for drafting the will. Joe builds the gazebo in time for Christmas. Charlotte drafts the will and delivers it to Joe the following January.
b. Ed buys 500 shares of Northstar stock in January 2009 for $4,000. On December 31, 2009, the shares are worth $4,600. In March 2010, Ed sells the shares for $4,500.
c. Dayo is the director of marketing for Obo, Inc. In December, the board of directors of Obo votes to give Dayo a $10,000 bonus for her excellent work throughout the year. The check is ordered and written on December 15 but is misplaced in the mail room and is not delivered to Dayo until January 5.
d. John is unemployed. During the current year, he receives $4,000 in unemployment benefits. Because the unemployment is not enough to live on, John sells drugs to support himself. His total revenue for the year is $120,000. The cost of the drugs is $60,000.