This year Ed celebrated his 25th year as an employee of Designer Jeans Company. In recognition of his long and loyal service, the company awarded Ed a gold watch worth $318 and a $2,740 cash bonus. What amount must Ed include in his gross income

$2,740 cash bonus

Explanation:

This year Ed celebrated his 25th year as an employee of Designer Jeans Company. In recognition of his long and loyal service, the company awarded Ed a gold watch worth $318 and a $2,740 cash bonus. What amount must Ed include in his gross income  $2,740

Gross income is the income earned from all different kinds of sources i.e, the sum of all wages, salaries, profits, interest payments, etc before payroll taxes and other deductions are taken out.

So, in the case of Ed, the company he worked for, awarded him with a gold watch and this gift is considered as an tangible property and tangible property offered as a reward to any employees are tax exempt up to $400, which in the case of Ed, the gold watch was with a price tag of $318 which is not up to the $400 is within the limit for tax exempt as stipulated under tangible property law .However, cash bonus is taxable regardless of the amount. The cash bonus will considered as part of his gross income. So, the amount Ed must included in his gross income is  $2,420.

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