Question

What is the tax treatment for a taxpayer receiving a gold watch valued at $350 in recognition of his 25th year of working for the same company?

a. The value of the watch is included from gross income.

b. The value of the watch is excluded from gross income.

c. The value of the watch is only excluded from gross income if the taxpayer donates it to a charitable organization.

d. One-half of the value of the watch must be included in gross income.

Answer 1

The IRS guidelines allow certain employee achievement awards like a gold watch given for a length of service to be excluded from gross income, assuming certain conditions are met.

Step-by-step explanation:

Regarding the tax treatment for a taxpayer receiving a gold watch valued at $350 as a long-service award, it is important to note that some employee achievement awards may be excluded from gross income. Based on IRS guidelines, if an employee receives a tangible personal property award as part of a meaningful presentation for length of service or safety achievement, it can be excluded from income, subject to certain limitations regarding frequency and value. In this context, given that the gold watch is a longevity award valued at $350 and assuming it meets other applicable criteria, the value of the watch is most likely excluded from gross income (b).