Latka Novatny Gave You the Following Information to Use in the Preparation

question 27

Essay

Latka Novatny gave you the following information to use in the preparation of his current year's tax return: $$\begin{array} { l r } \text { Salary } & \$ 120,000 \\\text { Dividends } & 20,000 \\\text { Itemized deductions } & 35,000\end{array}$$ In addition, he received $40,000 from a relative for whom he had worked previously. You have researched whet
$40,000 should be classified as a gift or compensation and are confident that substantial authority exists for classi as a gift. What tax compliance issues should you consider in deciding whether to report or exclude the $40,000?

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Definitions:

Forbearance

A creditor's agreement to temporarily postpone collection efforts or the enforcement of a debt obligation.

Legally Entitled

Having a legal right or claim to something under the law.

Bilateral Contract

A contract type involving two parties where each promises to perform an act in exchange for the other party's act.

Consideration

In contract law, this refers to something of value exchanged between parties as part of an agreement.