Hazel, a Solvent Individual but a Recovering Alcoholic, Embezzled $6,000

question 38

Multiple Choice

Hazel, a solvent individual but a recovering alcoholic, embezzled $6,000 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 $6,000 if she would attend Alcoholics Anonymous. Hazel met the conditions and her employer canceled the debt.

• A) Hazel did not realize any income because her employer made a gift to her.
• B) Hazel must include $6,000 in gross income from discharge of indebtedness.
• C) Hazel must include $6,000 in gross income under the tax benefit rule.
• D) Hazel may exclude the $6,000 from gross income because the debt never existed.
• E) None of the above.

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Definitions:

Visual Patterns

Visual patterns refer to the arrangement or sequence of shapes, lines, or colors that can be recognized visually and often repeat in a predictable manner.

Cerebral Cortex

The outer layer of the brain, involved in complex functions such as thought, language, memory, and consciousness.

Cerebellum

A region of the brain that plays an important role in motor control, and it may also be involved in some cognitive functions.

Feature-Detector Cells

Neurons in the brain that specialize in detecting specific features of the environment, such as angles, edges, and movements.