Eric and Tina have been friends since high school. Tina and her husband would regularly socialise with Eric and his wife. On Eric’s birthday, every year Tina would buy him a birthday present worth somewhere between $50 and $100. Eric’s full-time job is as an obstetrician at a major public hospital. When Tina was giving birth, coincidentally Eric was the obstetrician on duty. The birth was subject to complications and it was only Eric’s high level of competence and medical skill that saved the baby’s life. A month later, when Eric’s birthday came around, Tina bought him an expensive watch valued at $4,000. With it she gave him a card that read “Thanks for being a great friend and lifesaver”. She also gave the two nurses who assisted Eric in delivering her child necklaces worth $800 each. ignoring capital gains tax, discuss whether receipt of the watch constitutes assessable income for Eric.

Answer rating: 100% (QA)

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