Cornell Is a Building Contractor Who Builds 25-30 Homes a Year

Cornell is a building contractor who builds 25-30 homes a year. Charlotte is a real estate broker who sells all of Cornell's homes. Charlotte has recently referred a couple to Cornell who wanted him to build a $400,000 home for them. Knowing that Charlotte and her husband enjoy skiing, he bought her a nice pair of skis and boots.
I.The "gift" appears to be a form of compensation.
II.The skis are considered a gift for income tax purposes.
III.Substance-over-form applies to this situation.
IV.Charlotte recognizes gross income from the receipt of the skis.
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A) Only statement I is correct.
B) Only statement II is correct.
C) Statements I, III, and IV are correct.
D) Statements II and IV are correct.
E) Statements II, III, and IV are correct.

Correct Answer:

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