Teresa Has a Dental Plan Through Her Employer

question 16

Multiple Choice

Teresa has a dental plan through her employer.Recently,she has undergone dental work costing the plan $2,500.Luckily for Teresa,this particular dental work was covered completely by her dental plan.What are the tax consequences as a result of Teresa not having to pay for the dental work?

• A) Her employer will add the $2,500 as an expense in their income statement.
• B) She will have to include the $2,500 as additional income.
• C) There are no tax consequences at all as benefits are tax-free.
• D) Teresa will have to claim half of the benefit as income.

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Definitions:

Investments

Assets purchased with the expectation that they will generate income in the future or appreciate and be sold at a higher price.

Standby Equipment

Equipment that is kept on hand and ready to be used as a backup in case primary equipment fails.

Property, Plant, Equipment

Long-term tangible assets used in the operation of a business that are expected to provide benefits for more than one year.

Intangible Assets

Non-physical assets owned by a business, such as patents, copyrights, trademarks, and goodwill, that provide economic benefits.