Question

1. Cash received by an employee from an employer:

a. Is never included in gross income until it is earned.

b. Is not taxable unless the employer is legally obligated to make the payment.

c. May never be excluded from gross income.

d. Will be excluded from gross income only if it is a loan.

e. May be excluded from gross income if it is reimbursement for medical expenses.

Answer 1

The answer will be point d. which states that Cash received by an employee from an employer will be excluded from gross income only if it is a loan. It is because the loans which are extended by an employer should be returned back by the employee to the employer along with some amount of interest(interest is not always paid, but the loan amount should be paid). It will not remain with the employee forever and he is obliged to return it, so it cannot be considered as part of gross income.