Beatrice asks her employer to pay $500 of her monthly $5,000 salary to her son for his living expenses while away at college. Beatrice never receives this money it is paid directly to her son.

Beatrice must report taxable compensation income of $5,000 per month.

Beatrice's son must report $500 per month of taxable income.

Beatrice must report taxable compensation income of $5,000 per month; but, she gets a deduction for the $500 per month that is paid to her son.

Beatrice must report taxable compensation income of $4,500 per month.