Federal Tax Research 10th Edition by Roby Sawyers,William Raabe,Gerald Whittenburg,Steven Gill

Exercise 56

Cambro Construction Company hires union carpenters for home building. Cambro requires, as a condition of employment, that the carpenters provide and maintain various tools of their trade. Cambro pays each carpenter a set amount per hour as a "tool allowance" to cover the costs of the tools. This amount is determined quarterly based on national compiled data on the costs of carpenters' tools. How should this employee reimbursement be treated for tax purposes