Final answer:
Brad must include the disability benefits in his income as they are typically taxable when the employer pays the premiums. It aligns with IRS guidelines that state such benefits are taxed if the premiums are not taxed as part of the employee's income.
Step-by-step explanation:
Brad has to include all $11,500 of benefits from a disability plan purchased by his employer in his gross income because generally, when an employer pays for such a plan, the benefits are considered taxable income to the employee. If the premiums were paid with after-tax dollars, the benefits might be tax-free, but in this case where the employer pays the premiums, it implies that it is done with pre-tax dollars, hence the taxation on the benefits received.
This falls in line with the IRS's guidelines where disability benefits are taxed if the premiums are not included in the employee's taxable income. Since Brad's employer likely deducted the cost of the premiums as a business expense and did not include them in Brad's gross income, it results in the benefits being fully taxable when received.