An Electrician Completes a Rewiring Job and Is Paid $1,000

question 84

Multiple Choice

An electrician completes a rewiring job and is paid $1,000 by the customer in November.The customer has a small fire in his house and sues the electrician for the repayment of the $1,000 fee plus damages in December.The electrician reaches a settlement with the customer in the following February and refunds the $1,000 fee.How should the electrician treat these events when he files his tax return in April?

• A)No income will be reported.
• B)The income will be reported for the year of receipt,and a tax deduction will be claimed on the tax return for the year of repayment.
• C)The income will be reported for the year of receipt,and then an amended return will be filed in the following year to claim the refund.
• D)Both the income and the deduction will be reported on the same tax return (for the year of receipt).

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Definitions:

Fiscal Policy

Government adjustment of its spending levels and tax rates to monitor and influence a nation's economy.

Government Spending

The total amount of public sector expenditure, including spending on infrastructure, healthcare, education, and defense by the government.

GDP

Gross Domestic Product, the total market value of all finished goods and services produced within a country in a given period.

Economic Recovery

A period in which economic activity rebounds following a recession or economic downturn, characterized by increases in employment, consumer spending, and growth.