1. Miss Moneypenny is an administrative assistant at Universal Exports Corporation. In recognition of her 30 years of service, Universal Exports gives Moneypenny a gold clock worth $2,600. Universal Exports has a written, nondiscriminatory qualified plan in place that governs which employees are entitled to awards for length of service.

1. How much taxable income must Moneypenny recognize with respect to the receipt of the clock?

2. Assume, for purposes of this Part B only, that the clock is fully taxable to Miss Moneypenny and Universal Exports wants to absorb her tax liability on the $2,600 clock. Miss Moneypenny is in the 12% tax bracket. How much income will Universal Exports report on Moneypennys W-2 for both the $2,600 award and the gross-up it pays to cover the taxes? Ignore FICA.