Required: Briefly explain whether the $7,000 and the $180,000 receipts constitutes ordinary income' Alan works for a large investment bank called "Big Bank". He also regularly gives a 5 minute update on the day's events in financial markets on a late night TV show. Although the TV show does not pay him for this, Big Bank does give him $150 per appearance, as they believe that his appearance brings positive publicity to Big Bank. Alan earned $7000 from this activity in the past financial year. Recently, Big Bank has been experiencing tough economic conditions, and wishes to save some money. Subsequently, Big Bank gave Alan $180,000 (paid over two $90,000 instalments) in exchange for Alan agreeing to no longer receive annual bonuses that he had been entitled to in his contract. Alan had received bonuses of $50,000 - $100,000 per year for the last 5 years.
Required: Briefly explain whether the $7,000 and the $180,000 receipts constitutes ordinary income' Alan works for a large investment bank called "Big Bank". He also regularly gives a 5 minute update on the day's events in financial markets on a late night TV show. Although the TV show does not pay him for this, Big Bank does give him $150 per appearance, as they believe that his appearance brings positive publicity to Big Bank. Alan earned $7000 from this activity in the past financial year. Recently, Big Bank has been experiencing tough economic conditions, and wishes to save some money. Subsequently, Big Bank gave Alan $180,000 (paid over two $90,000 instalments) in exchange for Alan agreeing to no longer receive annual bonuses that he had been entitled to in his contract. Alan had received bonuses of $50,000 - $100,000 per year for the last 5 years.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Retain
Required: Briefly explain whether the $7,000 and the $180,000 receipts
constitutes ordinary income
Alan works for a large investment bank called "Big Bank". He also
regularly gives a 5 minute update on the day's events in financial markets
on a late night TV show. Although the TV show does not pay him for
this, Big Bank does give him $150 per appearance, as they believe that
his appearance brings positive publicity to Big Bank. Alan earned $7000
from this activity in the past financial year.
Recently, Big Bank has been experiencing tough economic conditions,
and wishes to save some money. Subsequently, Big Bank gave Alan
$180,000 (paid over two $90,000 instalments) in exchange for Alan
agreeing to no longer receive annual bonuses that he had been entitled
to in his contract. Alan had received bonuses of $50,000 - $100,000 per
year for the last 5 years.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8634aa5a-0395-4ed9-8346-75b455f23a74%2F06be90e5-47f1-440d-9f1d-4c9e9b7bca24%2Fbc9l66_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Retain
Required: Briefly explain whether the $7,000 and the $180,000 receipts
constitutes ordinary income
Alan works for a large investment bank called "Big Bank". He also
regularly gives a 5 minute update on the day's events in financial markets
on a late night TV show. Although the TV show does not pay him for
this, Big Bank does give him $150 per appearance, as they believe that
his appearance brings positive publicity to Big Bank. Alan earned $7000
from this activity in the past financial year.
Recently, Big Bank has been experiencing tough economic conditions,
and wishes to save some money. Subsequently, Big Bank gave Alan
$180,000 (paid over two $90,000 instalments) in exchange for Alan
agreeing to no longer receive annual bonuses that he had been entitled
to in his contract. Alan had received bonuses of $50,000 - $100,000 per
year for the last 5 years.
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