Carey is a self-employed landscaper he contracted to
Course:- Accounting Basics
Reference No.:- EM13601492

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Carey is a self-employed landscaper. He contracted to maintain Ted's lawn for $150 per month. Ted was very pleased with Carey's work and at the end of the year paid Carey an additional $500.

a. Does the fact that Ted had no legal obligation to make the payment mean that Carey can exclude the $500 from gross income as a gift?

b. True or False: The intent of the donor does not matter as long as there is no legal or moral obligation to pay the $500. The donor's intent may disqualify the $500 from being considered a gift.

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