LO.2 Rex, age 45, is an officer of Blue Company, which provides him with the following nondiscriminatory fringe benefits in 2010:

l Hospitalization insurance premiums for Rex and his dependents. The cost of the coverage for Rex is $2,700 per year, and the additional cost for his dependents is $3,600 per year. The plan has a $2,000 deductible, but his employer contributed $1,500 to Rex’s Health Savings Account. Rex withdrew only $800 from the HSA, and the account earned $50 interest during the year.

l Long-term care insurance premiums for Rex, at a cost of $3,600 per year.

l Insurance premiums of $840 for salary continuation payments. Under the plan, Rex will receive his regular salary in the event he is unable to work due to illness. Rex collected

$4,500 on the policy to replace lost wages while he was ill during the year.

l Rex is a part-time student working on his bachelor’s degree in engineering. His employer reimbursed his $5,200 tuition under a plan available to all full-time employees.

Determine the amount Rex must include in gross income.

DECISION MAKING