Question

Fred had several add. sources of income in 2017. He received a gift of $500 as a result of helping a friend build a house, and he was assigned $300 of interest due his uncle on bonds his uncle owns. He also had the use of a van (value of $1000) for the year from his parents who were traveling. Further, he received $600 of gasoline for the van because he tutored the son of the station owner for free. What of the add. income must be included in his income tax return?

Answer 1

Fred must include the $500 gift for services, the $1000 value of the van, and the $600 in gasoline received for tutoring on his tax return; the $300 of interest income typically would be reported by his uncle unless transferred to Fred.

Step-by-step explanation:

According to tax regulations, sources of income can have varying treatments. In Fred's situation, the $500 gift he received for helping a friend is considered income and must be included in his income tax return since it was for services rendered. The $300 of interest assigned to him that was due to his uncle from bonds would typically be reported by his uncle, not Fred, unless there was some agreement to transfer the interest to Fred. The use of the van is a non-cash fringe benefit; if it was provided for personal use, then the fair market value of $1000 should also be included in his gross income. Finally, the $600 in gasoline received from the station owner in exchange for tutoring services constitutes barter income which is taxable and therefore must also be reported on Fred's tax return.