Explain Why the Taxpayer in Each of the Following Situations

question 20

Essay

Explain why the taxpayer in each of the following situations either does or does not have taxable income and determine the amount, if any, that the taxpayer would have to recognize.
a.Leon works for Golfshop America, a large retailer of golf items. Golfshop allows all employees to purchase golf items at a 30% discount. Leon purchases a set of golf clubs for $700 that normally sells for $1,000 (cost of the golf clubs to Golfshop was $600). In addition, Leon is selected as salesman of the year and receives a gold putter worth $900.
b.Brenda is a student at Atlantic University. Brenda pays the $15,000 cost ($10,000 for tuition and books; $5,000 for living expenses) of attending Atlantic University with a $5,000 general scholarship from the college of economics, a $5,000 student loan, and $3,000 from her parents.
c.Becky pays off the loan on her son's car while he is a student at State University. The son, Daryl, owed $5,400 before Becky made the payment.
d.Leona is injured while on the job. She receives $4,000 from workers' compensation during the time she was away from her job.

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Definitions:

Substitution

The economic principle whereby consumers replace more expensive items with less costly alternatives, or firms use different inputs in their production process.

Mangoes

A tropical stone fruit with a sweet yellowish or orangish flesh, known for its nutritional value and distinct flavor.

Indifference Curve

A graph that represents combinations of goods among which a consumer is indifferent, showing the same level of satisfaction to the consumer.

Utility

A measure of satisfaction, usefulness, or pleasure derived from consuming goods and services.