Answered: Do you need to include the $25,000 in…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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1. Your favorite hobby is fishing. Last week you entered a fishing contest and – Wow! – caught the biggest fish and won the $25,000 grand prize. But you’re also a partner in a Big 4 accounting firm and make almost $500,000 a year there, so another $25,000? . . . you don’t really need it. You tell the contest sponsor “Thanks but no thanks” and ask that the money be donated directly to the American Red Cross instead. That is exactly what happens. Do you need to include the $25,000 in your 2020 gross income? Why or why not?

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