1. How much taxable income should each of the following taxpayers report?

a. Kimo builds custom surfboards. During the current year, his total revenues are $90,000, and he incurs $30000 in expenses. Included in the $30000 is as $10000 payment to Kimo's five year old son for services as an assistant.

b.Manu gives hula lessons at a local bar. During the current year, she receives $9000 in salary and $8000 in tips. In addition, she engages in illegal behavior, for which she receives $10000.

2. In each of the following cases, determine who is taxed on the income:

a. For $200, Lee purchases an old car that is badly in need of repair. He works on the car for 3 months and spends $300 on parts to restore it. Lee's son Jason needs $2000 to pay his college tuition. Lee gives the car to Jason, who sells it for $2000 and uses the money to pay his tuition.

b. Erica loans a friend $20000. The terms of the loan require the payment of $2000 in interest each year to Erica's daugther. At the end of 4 years, the $20000 loan principal is to be repaidto Erica.Erica's daughter will use the $2000 to pay her college tuition.

3.Determine whether Frank or Drothy, Frank's friend, is taxed on the income in each of the following situations:

a. Frank owns 8% bonds with a $10000 face value. The bonds pay interest annually on June 30. On september 30, Frank makes a bona fide gift of the bonds to Dorothy.

b. A few years ago, Frank wrote a best-selling book about computers. On August 1, he instructs the publisher to pay all future royalties to Dorothy.

c. Frank owns 1000 shares of Pujan stock. On may 1, Pujan declares a $12 per share dividen to shareholders of record as of June 1. On May 15, Frank gives the Pujan stock to Dorothy. She receives the $12000 dividend on June 30.