Do not waste time paraphrasing the Code. An accurate citation will suffice. Common abbreviations, e.g., GI, AR, AB, FMV, etc., may be used. Read the questions carefully. Answer only with respect to the parties about whom, and the taxable year about which, the questions ask.
All parties are cash method, calendar year taxpayers.
The law applicable to all transactions and situations is the Internal Revenue Code as in effect on the date of this exam. Assume the statute has been in effect in that form since 1916. Ignore all inflation adjustments . Buck suddenly remembered something about this income tax filing thing, and realized that he had 45 minutes to get his 1993 return to the Post Office before it closed. He raced back to his business books and started sorting his receipts and bills in order to determine his tax liability for 1993.