Question

To my friendly student tax preparer: Hello, my name is Shady Slim. I understand you are going to help me figure out my gross income for the year . . . whatever that means. It’s been a busy year and I’m a busy man, so let me give you the lowdown on my life and you can do your thing. I was unemployed at the beginning of the year and got $2,000 in unemployment compensation. I later got a job as a manager for Roca Cola. I earned $57,750 in base salary this year. My boss gave me a $6,100 Christmas bonus check on December 22. I decided to hold on to that check and not cash it until next year, so I won’t have to pay taxes on it this year. Pretty smart, huh? My job’s pretty cool. I get a lot of fringe benefits like a membership to the gym that costs $455 a year and all the Roca Cola I can drink, although I can’t really drink a whole lot—I figure $40 worth this year. As part of my manager duties, I get to decide on certain things like contracts for the company. My good buddy, Eddie, runs a bottling company. I made sure that he won the bottling contract for Roca Cola for this year (even though his contract wasn’t quite the best). Eddie bought me a Corvette this year for being such a good friend. The Corvette cost $61,000, and I’m sure he bought it for me out of the goodness of his heart. What a great guy! Here’s a bit of good luck for the year. Upon leaving my office one day, I found $8,550 lying in the street! Well, one person’s bad luck is my good luck, right? I like to gamble a lot. I won a $28,650 poker tournament in Las Vegas this year. I also won about $5,220 over the year playing the guys at our Friday night poker game. Can you believe that I didn’t lose anything this year? Speaking of the guys, one of them hit me with his car as we were leaving the game one night. He must have been pretty ticked that he lost! I broke my right leg and my left arm. I sued the guy and got $13,200 for my medical expenses and $3,550 to pay my psychotherapist for the emotional problems I had relating to the injuri

Answer 1

Shady Slim's gross income for tax purposes includes unemployment compensation, wages, fringe benefits, found money, and gambling winnings. The bonus check and the Corvette gift might also count as income depending on IRS rules.

Step-by-step explanation:

Calculating gross income for taxation purposes involves summing the total income from all sources within the tax year. Shady Slim's gross income would include the following:

The $2,000 in unemployment compensation, $57,750 as base salary from Roca Cola, the fringe benefits valued at $495 ($455 for gym membership and $40 for Roca Cola), the found money amounting to $8,550, gambling wins totaling $33,870 ($28,650 from a Las Vegas tournament and $5,220 from poker games), and any cash received from settlement like the $13,200 for medical expenses, which are non-taxable.

However, the Christmas bonus check of $6,100 that Shady Slim decided to hold onto and the Corvette received as a gift might be considered as income for tax purposes, depending on IRS regulations regarding gifts and constructive receipt.

Hence, the gross income that Shady Slim needs to report could potentially be higher than just the sum of his wage, unemployment compensation, found money, and gambling winnings.