Question

Ted was shopping for a new automobile. He found one that met his needs and agreed to purchase it for $23,000. He had shopped around and concluded that he could not get a better price from another dealer. After he had paid for the automobile, the dealer called to notify Ted that he was entitled to a manufacturer's rebate of $1,500. The next week he received a $1,500 check from the manufacturer. How much should Ted include in gross income?

Answer 1

Ted should not include the $1,500 rebate in his gross income. He would report the original purchase price of $23,000 as his gross income.

Step-by-step explanation:

To determine how much Ted should include in gross income, we need to consider the manufacturer's rebate of $1,500. In general, rebates are not considered taxable income. According to the IRS, a rebate is considered a reduction in the purchase price of a product, so it does not need to be included in gross income.

Therefore, Ted should not include the $1,500 rebate in his gross income. He would report the original purchase price of $23,000 as his gross income.