Question

Stacy is employed by a large corporation with 500 employees. The corporation has an exercise facility within its office for the exclusive use of the employees. A health club membership at a similar public facility would cost Stacy $1,200 per year. How much must Stacy include in her adjusted gross income?

$0

$500

$600

$1,200

Will sustained a serious injury in the course of his employment. As a result of this injury, he received the following payments:

Workers Compensation $2,500

Reimbursement from his employer’s accident and health plan for medical expenses paid by Will and not deducted by him $4,000

Compensatory damages for physical injuries $1,000

Punitive damages for physical injuries $6,000

The amount to be included in Will’s gross income should be:

$2,500

$4,000

$6,000

$13,000

Answer 1

Exercise Facility inside the work premise,owned and operated by the employer and for exclusive use of employees will not be taxed.

Hence Stacy need not include the health club membership fees in her adjusted gross income.

$0

Workers compensation is not taxable

Reimbursement for medical expense is not taxable

Compensatory damages for physical injury is mot taxable

Punitive damage for physical injury is taxable and to be reported as other income

Hence,

The amount to be included in Will’s gross income will be $6,000

$6,000