James, a cash basis taxpayer, received the following compensation and fringe benefits in the current year:

$$\begin{array} { lr }
\text { Salary } &\$ 66,000 \
\text { Disability income protection premiums } &3,000 \
\text {Long-term care insurance premiums } &4,000
\end{array}$$
His actual salary was $72,000. He received only $66,000 because his salary was garnished and the employer paid $6,000 on James's credit card debt he owed. The wage continuation insurance is available to all employees and pays the employee three-fourths of the regular salary if the employee is sick or disabled. The long-term care insurance is available to all employees and pays $150 per day towards a nursing home or similar facility. What is James's gross income from the above?

Question

James, a cash basis taxpayer, received the following compensation and fringe benefits in the current year:

$$\begin{array} { lr } 
\text { Salary } &\$ 66,000 \
\text { Disability income protection premiums } &3,000 \
\text {Long-term care insurance premiums  } &4,000
\end{array}$$
 His actual salary was $72,000. He received only $66,000 because his salary was garnished and the employer paid $6,000 on James's credit card debt he owed. The wage continuation insurance is available to all employees and pays the employee three-fourths of the regular salary if the employee is sick or disabled. The long-term care insurance is available to all employees and pays $150 per day towards a nursing home or similar facility. What is James's gross income from the above?

Quizplus · Accepted Answer

James's gross income includes his entire salary of $72,000, regardless of the garnishment for credit card debt. The disability income protection premiums and long-term care insurance premiums are not included in gross income as they are fringe benefits.

James, a Cash Basis Taxpayer, Received the Following Compensation and Fringe