Stephen is a furniture salesman for Foster's Furniture Mart. Stephen purchases a bedroom suite from Foster's for $8,000. The sticker price is $11,000. Foster's policy is to "discount" all customer purchases for up to $1,000 off of the sticker price for purchases over $10,000. What is the tax treatment of Stephen's furniture purchase?
I.Stephen does not need to account for the furniture purchase since it is for his personal use.
II.Stephen has imputed income because of the nature of the furniture purchase.

Question

Stephen is a furniture salesman for Foster's Furniture Mart. Stephen purchases a bedroom suite from Foster's for $8,000. The sticker price is $11,000. Foster's policy is to "discount" all customer purchases for up to $1,000 off of the sticker price for purchases over $10,000. What is the tax treatment of Stephen's furniture purchase?
I.Stephen does not need to account for the furniture purchase since it is for his personal use.
II.Stephen has imputed income because of the nature of the furniture purchase.
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Quizplus · Accepted Answer

Statement II is correct because Stephen has received a discount of $1,000 from the sticker price, which is considered imputed income. Imputed income is the value of goods or services received by an individual that is not included in their taxable income. Statement I is incorrect because, even though the purchase is for Stephen's personal use, he still needs to account for the imputed income.

Stephen Is a Furniture Salesman for Foster's Furniture Mart