McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 39

Matt works for Fresh Corporation.Fresh offers a cafeteria plan that allows each employee to receive $15,000 worth of benefits each year.The menu of benefits is as follows: For each of the following independent circumstances, determine the amount of income Matt must recognize and the amount of deduction Fresh may claim (ignore FICA taxes):
a.Matt selects the single health insurance and places $10,000 in his 401(k).b.Matt selects the single health insurance, is reimbursed $5,000 for MBA tuition, and takes the remainder in cash.c.Matt selects the single health insurance and is reimbursed for MBA tuition of $10,000.d.Matt gets married and selects the health insurance with his spouse and takes the rest in cash to help pay for the wedding.e.Matt elects to take all cash.