Question

Keren Wiseman is an employee of Dimensionworks Designs in New Mexico. She received the following achievement awards from her employer during 2017: Best Design, Santa Fe County: $1,340 Top Graphic Layout, New Mexico: $1,775 Employee of the Year: $785Required:How much of her achievement award income is taxable? ____

Answer 1

$2,300

Step-by-step explanation:

Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income.

The excludable amount or deduction is $1,600 out of total amount of awards.

Total amount of awards = Design + Graphic + Employee of the year

= $1,340 + $1,775 + $785

= $3,900

Taxable awards = Total amount of awards – Excludable amount

= $3,900 – $1,600

= $2,300

However, because the $3,900 total value of the awards is more than $1,600, Keren must include $2,300 in his taxable income.