Question

Linda and Richard are married and file a joint return for 2019. During the year, Linda, who works as an accountant for a national airline, used $2,100 worth of free passes for travel on the airline; Richard used the same amount. Linda and Richard also used $850 worth of employee discount coupons for hotel rooms at the hotel chain that is also owned by the airline. Richard is employed at State University as an accounting clerk. Under a tuition reduction plan, Richard saved $4,000 in tuition fees during 2019. He is studying for a master's degree in business at night while still working full-time. Richard also had $30 worth of personal typing done by his administrative assistant at the University.

Required:
What is the amount of fringe benefits that should be included in Linda and Richard's gross income on their 2018 tax return?

Answer 1

Answer:

$4,850

Explanation:

The free passes are customer discounts and does not qualifies for taxable in kind benefits. The $850 is an in-kind benefits and thus must be included in the gross income. Furthermore, the $4,000 fee reduction is all because of the university employment and thus must be included in the gross income.

The $30 worth of personal typing done by Richard's administrative assistant is a third party favor and this favor was not from the employer so it has nothing to do with tax.

The increase in taxable gross income will be as under:

Increase in Taxable Gross Income = $850 + $4,000 = $4,850