Hardaway earned $118,000 of compensation this year. He also paid (or had paid for him) $3,100 of health insurance (not through an exchange).

What is Hardaway's AGI in each of the following situations? (Ignore the effects of Social Security and self-employment taxes.)

a. Hardaway is an employee, and his employer paid Hardaway's $3,100 of health insurance for him as a nontaxable fringe benefit. Consequently, Hardaway received $114,900 of taxable compensation and $3,100 of nontaxable compensation.

b. Hardaway is a self-employed taxpayer, and he paid $3,100 of health insurance himself. He is not eligible to participate in an employer-sponsored plan.