Mike contracted with Kram Company, Mike's controlled corporation.Mike was a medical doctor and the contract provided that he would work exclusively for the corporation.No other doctor worked for the corporation.The corporation contracted to perform an operation for Rosa for $8,000.The corporation paid Mike $6,500 to perform the operation under the terms of his employment contract.
A)Mike's gross income is $6,500.
B)Mike must recognize the $8,000 gross income because he provided the service.
C)Mike must recognize $8,000 gross income since the patient obviously wanted him to perform the operation.
D)The Kram Company corporation's gross income is $1,500.
E)None of the above.

Question

Quizplus · Accepted Answer

Mike's gross income is $6,500, as that is what he received under the terms of his employment contract. The gross income of the corporation is $8,000, but that is separate from Mike's personal income. As a result, options B, C, and D are incorrect.

Mike Contracted with Kram Company, Mike's Controlled Corporation