Question

Which one of the following receipts constitutes "ordinary income" for an employee?

a. Damages for personal injury and suffering received because of an accident the employee suffered at work
b. a reimbursement of a work-related expense.
c. A birthday card and $50 gift voucher were received on the employee's birthday from their work colleagues.
d. a fringe benefit.
e. a $250 cash prize from the employer for winning the firm's Employee of the Year award.

Answer 1

The correct answer is e. A $250 cash prize from the employer for winning the firm's Employee of the Year award is considered 'ordinary income' for an employee.

Step-by-step explanation:

The correct answer is e. a $250 cash prize from the employer for winning the firm's Employee of the Year award. Receiving a cash prize as an Employee of the Year award is considered 'ordinary income' for an employee. Ordinary income refers to income that is earned through regular employment activities, such as salaries, wages, and bonuses. In this case, the $250 cash prize is directly related to the employee's performance and is received as a result of winning the award. It is therefore considered ordinary income for the employee.