Mike contracted with Kram Company,Mike's controlled corporation.Mike was a medical doctor and the contract provided that he would work exclusively for the corporation.No other doctor worked for the corporation.The corporation contracted to perform an operation for Rosa for $2,400.The corporation paid Mike $2,000 to perform the operation under the terms of his employment contract.
A)Mike's gross income is $2,000.
B)Mike must recognize the $2,400 gross income because he provided the service.
C)Mike must recognize $2,400 gross income since the patient obviously wanted him to perform the operation.
D)The Kram Company corporation's gross income is $400.
E)None of the above.

Question

Quizplus · Accepted Answer

The contract was between Kram Company and Rosa, not between Mike and Rosa. Mike was simply an employee of Kram Company and received payment for his services from the corporation. Therefore, his gross income is only the $2,000 paid to him by the corporation.

Mike Contracted with Kram Company,Mike's Controlled Corporation