Karl works at Moe's grocery. This year Karl was paid $43,000 in salary but he was allowed to purchase his groceries at 10% below Moe's cost. This year Karl spent $3,600 to purchase groceries costing Moe $4,000 and worth $6,000. What amount must Karlinclude in his gross income?

Question

Quizplus · Accepted Answer

Karl must include the amount that he saved by purchasing his groceries at 10% below Moe's cost as a taxable benefit. Moe's cost for the groceries Karl purchased is $4,000, but he only paid $3,600, which means he saved $400. Therefore, the taxable benefit for Karl is $400.

Karl's gross income would be his salary of $43,000 plus the taxable benefit of $400, which equals $43,400.

Karl Works at Moe's Grocery