What is the proper tax treatment for each of the following expenses?
a. All apartment house construction in Sandy Beach must comply with local and state building codes. To ensure that these codes are observed, Rex, a city building inspector, regularly visits construction sites. Shoddy Construction deposits $20,000 in a fund to provide a scholarship for Rex’s son to attend college. The payment is in appreciation for Rex’s help in getting around a building code violation.
b. Rachel operates a pharmacy. She pays a 10% commission on all Medicare and Medicaid business and a 5% commission on all other business sent her way by the Last Stop Nursing Home.
c. Kelly is a registered nurse. She receives a $1,750-per-month salary working for a local clinic. Because Kelly is five minutes late to work two days in a row, the clinic fines her $25. Thus, her salary for the current month is $1,725.