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 Karl include in his gross income?

Question

Quizplus · Accepted Answer

Karl must include his salary of $43,000 in his gross income. He must also include the amount of his grocery purchases that exceeds Moe's cost, which is $600 ($6,000 - $4,000). However, since Karl is an employee, the 10% discount he received on his groceries is considered a fringe benefit and is not taxable. Therefore, Karl must include $600 in his gross income, bringing the total to $43,600.

Karl Works at Moe's Grocery