Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

After a brief illness, Bill died. Bill's employer paid $20,000 to his widow. The corporation sent along a letter with the check indicating that $5,000

After a brief illness, Bill died. Bill's employer paid $20,000 to his widow. The corporation sent along a letter with the check indicating that $5,000 represented payment for Bill's accrued vacation days and back wages. The balance was being awarded in recognition of Bill's many years of loyal service. The company was obligated to pay the accrued vacation days and back wages, but the balance was discretionary.

Requirements

a.

Is the employer entitled to deduct the $20,000 paid to Bill's widow?

b.

Is Bill's widow required to include the $20,000 in her gross income?

Requirement a. Is the employer entitled to deduct the $20,000 paid to Bill's widow?

No.

Yes.

The $20,000 paid to Bill's widow

can

cannot

be deducted by the employer.

Requirement b. Is Bill's widow required to include the $20,000 in her gross income?

No.

Yes.

The $20,000

would

would not

be taxable to Bill's widow.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Jan Williams, Susan Haka, Mark S Bettner, Joseph V Carcello

16th edition

1259692396, 77862384, 978-0077862381

More Books

Students also viewed these Accounting questions

Question

What does the Endangered Species Act do?

Answered: 1 week ago