Janelle receives a sterling silver tea set valued at $500 from her employer during her retirement dinner for her long years of service. The employer has a tradition of giving awards to some retiring employees, but has no qualified plan.
I.$400 is excludable from Janelle's Gross Income.
II.The $500 is excludable even if her employer only gives awards to its top executives.

Question

Janelle receives a sterling silver tea set valued at $500 from her employer during her retirement dinner for her long years of service. The employer has a tradition of giving awards to some retiring employees, but has no qualified plan.
I.$400 is excludable from Janelle's Gross Income.
II.The $500 is excludable even if her employer only gives awards to its top executives.
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Quizplus · Accepted Answer

According to the IRS rules, gifts and awards given to employees as a result of their length of service are not taxable income up to a limit of $400. Therefore, in this case, Janelle can exclude up to $400 from the value of the tea set from her gross income. However, statement II is incorrect as the exclusions and limitations on gifts and awards apply equally to all employees, regardless of their position within the company.

Janelle Receives a Sterling Silver Tea Set Valued at $500