Henry Works Part Time on Auto Repairs and Restoration Projects

question 142

Essay

Henry works part time on auto repairs and restoration projects. This year Henry was paid $5,400 for repairs he made to his neighbor's auto. Henry's neighbor promised to pay Henry another $2,200 in cash next year. Henry's brother borrowed $4,100 in cash in December of this year and gave him a negotiable promissory note for $4,300, due in three months with interest. Henry sold the note in January of next year for $3,500. Finally, Henry restored a car for the football coach. The coach paid him this year with a pass to next year's football games. The pass is worth $750. Compute Henry's gross income for this tax year, assuming that he uses the cash basis of accounting.

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Definitions:

Gross Incomes

The total income received before any deductions or taxes are subtracted.

Price Elasticity

An indicator of the degree to which the demand for a product is affected by fluctuations in its price, showing how sensitive buyers are to variations in cost.

Monet Paintings

Works of art created by Claude Monet, a founder of French Impressionist painting, characterized by their impression of the landscape or scenes, focusing on the effects of light and color.

Perfectly Inelastic

A demand scenario where the quantity demanded does not change regardless of price fluctuations.