Federal Tax Research 10th Edition by Steven Gill, Gerald Whittenburg, Roby Sawyers, Debra Sanders, William Raabe

Exercise 5

Carline's son, Leon, 10, is a musical prodigy. Carline, also a musical person, has spent a significant amount of time teaching Leon music and promoting his possible career. When Leon finally receives a recording contract, Carline is designated in the contract to receive one-half of Leon's total earnings. Discuss the proper recognition of gross income and related deductions concerning this arrangement.