John Smith Tax issue
1(a) Issue: The issue is the $300,000 in income for John’s fees. How to treat this in Income Tax?
Rule of Law: Section 61(a) of the Code the concept of income is broad and general. Gross income means all income from whatever source derived, including (but not limited to) the following items: (1) Compensation for services, including fees, commissions, fringe benefits, and similar items;
(2) Gross income derived from business;
(3) Gains derived from dealings in property;
(4) Interest;
(5) Rents;
(6) Royalties;
(7) Dividends;
(8) Alimony and separate maintenance payments;
(9) Annuities;
(10) Income from life insurance and endowment contracts;
(11) Pensions;
(12) Income from discharge of indebtedness;
(13) Distributive share of partnership gross income;
(14) Income in respect of a decedent; and
(15) Income from an interest in an estate or trust.

I.R.C § 61
Analysis: Section 61(a) it basically says that the gross income is not limited to these items, but that these are just the most typical sources of income. It is irrelevant whether or not the above items are received in money, goods, or services.
Conclusion: The $300,000 that John received for services rendered from the court case is considered earned income for the year. The $300,000 is earned income for John Smith and will be reported as gross income either on Schedule C of the individual return or as gross income on the LLC return. “US code defines gross income in 26 U.S.C § 61 states except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including but not limited to the following items: (1) Compensation for services, including fees, commissions, fringe benefits, and similar items.” There isn’t any other way to treat the $300,000 because it is considered gross income and