This Year Zach Was Injured in an Auto Accident

question 22

Multiple Choice

This year Zach was injured in an auto accident.As a result he received the following payments.Zach received $18,000 of disability pay.Zach has disability insurance provided by his employer as a nontaxable fringe benefit.Zach's employer paid $4,300 in disability premiums for Zach this year.Zach's hospital bills totaled $4,500 and were paid by his health insurance.Zach has health insurance provided by his employer as a nontaxable fringe benefit.Zach's employer paid $6,250 in health insurance premiums for Zach this year.What amount must Zach include in his gross income?

• A)$22,500
• B)$18,000
• C)$4,500
• D)$10,550
• E)Zero - none of these benefits is included in gross income

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Definitions:

Depreciation

The allocation of the cost of a tangible asset over its useful life, representing the decrease in value due to wear and tear, age, or obsolescence.

Trade-In Allowance

Trade-In Allowance is the credit a dealer offers to the consumer towards the purchase of a new item by trading in an older model or item.

Depreciation

A technique for distributing the expense of a physical asset throughout its lifespan.

Commercial Substance

A term used in accounting to indicate that a transaction significantly changes the economic position of the parties involved.