Hazel,a solvent individual but a recovering alcoholic,embezzled $5,000 from her employer.In the same year that she embezzled the funds,her employer discovered the theft.Her employer did not fire her and told her she did not have to repay the $5,000 if she would attend Alcoholics Anonymous.Hazel met the conditions and her employer canceled the debt.

Question

Quizplus · Accepted Answer

Hazel embezzled $5,000 from her employer, which means she took the money without authorization. This amount is considered income to her, even if it was obtained illegally. When her employer canceled the debt in exchange for her attendance at Alcoholics Anonymous, it was considered discharge of indebtedness, which is also taxable income and must be included in gross income. Therefore, the correct choice is C.

Hazel,a Solvent Individual but a Recovering Alcoholic,embezzled $5,000 from Her