Question

Mark and his brother, Rick, each own farms. Rick is experiencing severe financial difficulties and cannot afford to buy feed for his cattle. Mark purchases $2,000 of feed and gives Rick one-half of the feed. Mark tells Rick that there is no need to repay him and to consider the feed a gift. Which of the following statements is true?A) Mark can deduct $2,000 for the feed.B) Mark can deduct $1,000 for the feed.C) Rick must report $1,000 as income.D) None of the above is true.

Answer 1

Answer:

D) None of the above is true.

Explanation:

Mark cannot deduct the gift give to his brother. Gift deduction are only allowed to charitable contribution on qualified organization.

In fact, a gift to high could provoke Mark to be subject to gift taxes.

As this is a gift Rick will not report this as income.

Answer 2

Answer:

B) Mark can deduct $1,000 for the feed.

Explanation:

Gifts upto a certain amount of money are not required to be reported so Rick shouldn´t report that gift nor pay taxes for it, but in the case of mark he could deduct the $1,000 for the gift of the feed to his brother, there are certain documents that need to be handled and shared but Mark cna deduct the $1000 that he gave to Rick from his taxes.