Reference no: EM132680753

Problem 1: Paul is a college student and works as a server in a restaurant. Usually he gets a 20% tip, A customer spent $50 on a meal. Paul was expecting a $10 tip but to his surprise the customer left a $100 tip. He did feel the customer was flirting with him but he also felt that the customer might have mistaken a $100 bill for a $10 bill. Paul was so gratified that he gave $15 to the cashier. Which of the following is true?

Select one or more:

a. If the customer had already made lifetime gifts of over $11,580,000, he would owe gift tax on the $90 as a gift.
b. If Paul ran after the customer and gave him back $90, Paul would report $10 as income even though he was in actual and constructive receipt of $100.
c. $10 is taxable to Paul and $90 is a gift which is not taxable to Paul
d. If the customer was in business he could deduct $100 as a business expense (see meals and entertainment page 9-8 to 9-9 in textbook)
e. $85 is taxable to Paul because he shared the tip with the cashier.
f. Paul would report $100 as income even if the customer made a mistake and even if he shared the tip with the cashier.