Which of the following statements is/are correct?
I.Maria receives a necklace worth $300 from her employer in recognition of her production unit's safety record at the company's annual meeting. Maria is not taxed on the $300.
II.Reggie opens a savings account at Mid Financial Savings and Loan. For opening the account he receives a microwave worth $200. On December 31, his account is credited for $300 of interest income. Reggie must report $500 of income.
III.Manu receives a salary of $80,000 as CEO of Camp's Cooking Crockery. Manu owns 60% of Camp's, which is organized as an S corporation. Camp's taxable income for the current year is $300,000 and Camp's pays $100,000 of dividends. Manu must recognize $360,000 of income.

A)Statements I, II, and III are correct.
B)Only statements I, and II are correct.
C)Only statements II and III are correct
D)No statement is correct.

Question

Which of the following statements is/are correct?
I.Maria receives a necklace worth $300 from her employer in recognition of her production unit's safety record at the company's annual meeting. Maria is not taxed on the $300.
II.Reggie opens a savings account at Mid Financial Savings and Loan. For opening the account he receives a microwave worth $200. On December 31, his account is credited for $300 of interest income. Reggie must report $500 of income.
III.Manu receives a salary of $80,000 as CEO of Camp's Cooking Crockery. Manu owns 60% of Camp's, which is organized as an S corporation. Camp's taxable income for the current year is $300,000 and Camp's pays $100,000 of dividends. Manu must recognize $360,000 of income.
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A)Statements I, II, and III are correct.
B)Only statements I, and II are correct.
C)Only statements II and III are correct
D)No statement is correct.

Quizplus · Accepted Answer

Statement I is correct because gifts of nominal value for achievement or length of service are not taxable. Statement II is correct because the value of the microwave as a gift is taxable, and the interest income is taxable as well. Therefore, Reggie must report $500 of income. Statement III is incorrect because Manu would recognize income based on his share of Camp's taxable income, which is $180,000 (60% of $300,000). The dividends paid by Camp's are not included in his taxable income since they have already been taxed at the corporate level.

Which of the Following Statements Is/are Correct