Ramon is a waiter at Trucker's Delight Restaurant. He eats two meals each day at the restaurant at no charge. One is eaten just before he begins work; the other is eaten during working hours. The value of meals consumed by Ramon during the current year is $2,500, evenly distributed between the two meals. What are the tax effects of this situation?
I.Ramon will have to recognize $1,250 of income.
II.None are taxable because the meals are for the convenience of the employer.
III.If Ramon has the option of receiving his choice of either a cash payment or the two meals, the $2,500 is taxable.

Question

Ramon is a waiter at Trucker's Delight Restaurant. He eats two meals each day at the restaurant at no charge. One is eaten just before he begins work; the other is eaten during working hours. The value of meals consumed by Ramon during the current year is $2,500, evenly distributed between the two meals. What are the tax effects of this situation?
I.Ramon will have to recognize $1,250 of income.
II.None are taxable because the meals are for the convenience of the employer.
III.If Ramon has the option of receiving his choice of either a cash payment or the two meals, the $2,500 is taxable.
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Quizplus · Accepted Answer

Meals provided to employees for the convenience of the employer are not taxable. However, if the employee has the option of receiving cash instead of the meals, the value of the meals is taxable. In this case, Ramon does not have the option of receiving cash instead of the meals, so the value of the meals is not taxable.

Ramon Is a Waiter at Trucker's Delight Restaurant