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One month ago Lolita’s uncle gave Larry and Lolita a check for $25,000. He said that he had won
some money while gambling in Reno. He wanted to share his good fortune with family. Larry is
concerned about the tax ramifications of this transaction. Which statement(s) below is (are) true
in this situation? 1. Larry and Lolita must pay state and federal income tax on the full $25,000.
II. Larry and Lolita must split the tax liability with Lolita’s uncle.
HI. Lolita's uncle must pay state and federal income taxes on the winnings. IV. Lolita and Larry need not pay any tax because the $25,000 is a gift. a. I only
1:). 11 only
c. III only d. II and III only e. III and IV only

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