Question
Clay Pottersfeld, a cash-basis taxpayer, made pottery in his garage and sold it. In addition to the profit from ordinary pottery sales in the current
Clay Pottersfeld, a cash-basis taxpayer, made pottery in his garage and sold it. In addition to the profit from ordinary pottery sales in the current year, Clay exchanged pottery for a used car worth $2,500. Clay helped a friend make some vases and received $1,200 worth of the vases in return. One of Clays pottery ovens was damaged by vandals; he recovered $1,700 in damages and $1,300 for lost profits while it was being repaired. His basis in the pottery ovens, before damage, was $3,000, and the $1,700 received was equal to the cost of repairs. How much should be included in Clays current-year gross income from these transactions?
A. $3,700 B. $6,700 C. $5,000 D. $2,500
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started