Final answer:
The $30,000 embezzled by an employee must be included in their gross income for tax purposes, as illegal income is taxable under U.S. law. Adjusted gross income consists of all income sources before deductions and exemptions are applied to derive taxable income.
Step-by-step explanation:
The question pertains to whether the $30,000 embezzled by an employee should be included in or excluded from gross income. According to U.S. tax law, illegal income, such as money obtained through embezzlement, is subject to taxation and must be reported as income. Therefore, the $30,000 embezzled by the employee must be included in the employee's gross income. This situation falls under the concept of "illegal income," where even ill-gotten gains are subject to tax. The employee would need to report this as income and pay individual income tax on these earnings. Failure to report this income could result in legal penalties.
The basic concept of taxation requires that adjusted gross income consists of all income from various sources, which on a tax form is offset by any standard deductions and exemptions to arrive at taxable income. Even though the act of embezzlement is illegal, the income itself is still taxable by law.
On a side note, deductions from employee wages, such as withholding tax and payroll taxes, do not typically apply to embezzled funds, since these are not legally obtained wages through an employer. However, once the money is in the hands of the employee, it becomes subject to taxation.