MLC301 Principles Of Income Tax Law - Question/Answer Assessment Help

Question 6 (4 points)

Discuss the tax consequences for Adam for both of his choices below (the $50,000 receipt and the monthly receipt) (4 marks).
Adam enters into a local radio station competition in which he has to guess the answer to a riddle. Clues for the riddle are released each week. The radio station call Adam and he successfully guesses the correct answer, and wins the prize. The radio station offers Adam two choices on how to redeem his prize. The first is a lump sum payment of $50,000. The second is that he can= exchange his prize money for monthly installments. The monthly installments are $5,000 a month for 12 months.