Question

1. Ted was shopping for a new automobile. He found one that met his needs and agreed to

purchase it for $23,000. He had shopped around and concluded that he could not get

a better price from another dealer. After he had paid for the automobile, the dealer called

to notify Ted that he was entitled to a manufacturer’s rebate of $1,500.

The next week he received a $1,500 check from the manufacturer.

How much should Ted include in gross income?

Answer 1

When an Asset is purchased any expenses made directly on asset are not showned as Expenses, they are added to the cost of Asset. Similarly, any rebate received on purchase of Asset cannot be treated as Gross Income, it would be deducted from the cost of Asset.

Therefore, Cost of Automobile = $23,000 - $1,500

= $ 21,500

But, there would not be any effect of it on Gross Income.

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