Required: Ignoring capital gains tax, discuss whether Nick’s receipt of the laptop constitutes assessable income. Bessie...

Required: Ignoring capital gains tax, discuss whether Nick’s receipt of the laptop constitutes assessable income.

Bessie enters into a contract with a builder for some major renovations on her main residence. However, she finds that much of the work undertaken by the builder is substandard. She wished to take the builder to court. To save costs, Bessie did not engage a lawyer. Rather, she handles a lot of the legal work herself and often seeks the informal guidance of Nick for advice. Nick is a full-time lawyer and has been friends with Bessie for over 20 years. Bessie will often speak to Nick about what her next step should be in the legal proceedings against the builder. When Bessie prepares written correspondence and official documentation relating to the case herself, she gets Nick to review it. Nick does all this for free. For a few months, Nick typically spends about 2 hours a week on this.

Ultimately, Bessie’s case with the builder is settled out of court for an amount that Bessie is very happy with. Bessie, as a show of gratitude for Nick’s help, buys him a brand-new laptop worth $4,000 as a present, which Nick reluctantly accepts.

Expert Solution

As per section 2051 of the code (chapter 12, subtitle B of international revenue code united state)

Law says

Gift mean any sum of money, immovable property received by any person without any consideration.
Gift are given out of affection, respect, charity, admiration and any other similar purpose.
Gift considered as gift only when the doner receives nothing any value in exchange for the given gift

Fact of the given case the tax is generaly impose on doner in case of taxable gift in form of cash, immovable property, stock or any other tangible or intangible property unless the retantion of any interest which delay completion of gift. The receiver of gift not need to pay any tax there is only doner will liable to pay tax if the amount of gift exceeds the limit of $15000.

Bessie gifted a brand new laptop worth of $4000 to his friend nick ( full time lawyer) as a present for helping her in winning the case against the builder. this transaction which is made by bessie without any consideration in return so in this case bessie is not receive anything in exchange she has given it as present for nick selfless dedicated time for her legal matter.

Conclusion
It is very clear that the amount of gift does not exceed the limit of $15000 Therefore bessie does not need to pay any gift tax

Nick receipt of the laptop does not constitutes assesable income here.

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ekkarill92 answered 1 year ago

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Required: Ignoring capital gains tax, discuss whether Nick’s receipt of the laptop constitutes assessable income. Bessie...

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