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:

Labor Standards

Benchmarks or norms established for the amount of labor required to perform a task efficiently, often used to set production targets and labor budgets.

Particular Product

A specific item or good offered for sale by a business.

Labor Rate Variance

The difference between the actual cost of labor and the expected (or budgeted) cost of labor based on standard rates and hours.

Labor Standards

Benchmarks or norms for the amount of labor time required to perform a certain task or produce a certain amount of goods.