James, a cash basis taxpayer, received the following compensation and fringe benefits in the current year: $$\begin{array} { l r }
\text { Salary } & \$ 66,000 \
\text { Disability income protection premiums } & 3,000 \
\text { Long-term care insurance premiums } & 4,000
\end{array}$$ His actual salary was $72,000.He received only $66,000 because his salary was garnished and the employer paid the $6,000 owed on James's credit card.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 toward 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: $$\begin{array} { l r } 
\text { Salary } & \$ 66,000 \
\text { Disability income protection premiums } & 3,000 \
\text { Long-term care insurance premiums } & 4,000
\end{array}$$ His actual salary was $72,000.He received only $66,000 because his salary was garnished and the employer paid the $6,000 owed on James's credit card.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 toward a nursing home or similar facility.What is James's gross income from the above?

Quizplus · Accepted Answer

Gross income includes all income received in the form of money, goods, property, and services that is not exempt from tax. In this case, James's gross income includes his actual salary of $72,000. The garnishment of his salary to pay a debt does not reduce his gross income. The disability income protection and long-term care insurance premiums paid by the employer are fringe benefits that are not included in gross income in this context. Therefore, the correct answer is his actual salary of $72,000.

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