Mr. Hand has $1,000 taxable income. Mr. Sandwich has $3,000 of taxable income. M

Question

       Mr. Hand has $1,000 taxable income.
       Mr. Sandwich has $3,000 of taxable income.
       Mr. Sandwich has $4,000 of taxable income.
       Neither Mr. Hand nor Mr. Sandwich has any taxable income from this transaction.

In return for $1,000, Mr. Hand cancels Mr. Sandwich's debt of $4,000. The cancellation is not a gift, and Mr. Sandwich is neither insolvent nor bankrupt. Which of the following statements is correct? (Points : 5) In return for $1,000, Mr. Hand cancels Mr. Sandwich's debt of $4,000. The cancellation is not a gift, and Mr. Sandwich is neither insolvent nor bankrupt. Which of the following statements is correct?

Explanation / Answer

Mr. Sandwich has $3,000 of taxable income.

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