An electrician completes a rewiring job and is paid $1,000 by the customer in November. The customer has a small fire in his house and sues the electrician for the repayment of the $1,000 fee plus damages in December. The electrician reaches a settlement with the customer in the following February and refunds the $1,000 fee. How should the electrician treat these events when he files his tax return in April?
A. The income will be reported for the year of receipt, and a tax deduction will be claimed on the tax return for the year of repayment.
B. Both the income and the deduction will be reported on the same tax return (for the year of receipt).
C. The income will be reported for the year of receipt, and then an amended return will be filed in the following year to claim the refund.
D. No income will be reported.
Answer: A
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