Dave is a plumber who uses the cash method of accounting.This year Dave requested that his clients make their checks payable to his son, Steve.This year Steve received checks in the amount of $62,000 for Dave's plumbing services.Which of the following is a true statement?

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Quizplus · Accepted Answer

Since Dave is the one performing the plumbing services, he is the one who must report the income on his tax return, regardless of who received the checks. The fact that the checks were made payable to his son does not change this. Therefore, Dave is taxed on the $62,000 of plumbing income this year. Option B is incorrect because Steve did not perform the plumbing services and has no claim to the income. Option C is incorrect because the payments were not gifts but payment for services rendered. Option D is incorrect because Dave cannot deduct income that he did not report or receive.

Dave Is a Plumber Who Uses the Cash Method of Accounting.This