Tommy, a Senior at State College, Receives Free Room and Board

question 95

Multiple Choice

Tommy, a senior at State College, receives free room and board as full compensation for working as a resident advisor at the university dormitory. The regular housing contract is $2,000 a year in total, $1,200 for lodging and $800 for meals in the dormitory. Tommy had the option of receiving the meals or $800 in cash. Tommy accepted the meals. What must Tommy include in gross income from working as a resident advisor?

• A) All items can be excluded from gross income as a scholarship.
• B) The meals must be included in gross income.
• C) The meals may be excluded because he did not receive cash.
• D) The lodging must be included in gross income because it was compensation for services.
• E) None of these.

Apply financial tables or calculators for precise financial planning and calculations.

Develop strategies for saving and investing based on compounded interest calculations.

Distinguish between the computations of future value and present value.

Utilize practical examples to enhance comprehension of compounding and savings strategies.

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Definitions:

Wash Sale

A tax term referring to the sale of a security at a loss and the repurchase of the same, or substantially the same, security shortly before or after, which disallows the claim of the loss for tax purposes.

Substantially Identical

Refers to property or securities that are nearly the same, often used in tax rules concerning wash sales.

Fair Market Value

The price at which an asset would sell on the open market between a willing buyer and a willing seller.

Rental Business

An entrepreneurial activity where an individual or entity rents out properties or equipment to others for a profit.