Final answer:
Option D, the gift certificate for a ham or turkey, is a de minimis fringe benefit excluded from taxable earnings as it cannot be easily converted into cash.
Step-by-step explanation:
The term "de minimis" fringe benefits refers to any property or service provided by an employer to an employee that has so little value that accounting for it would be unreasonable or administratively impracticable. According to IRS guidelines, cash and cash-equivalent items like gift certificates that can be easily exchanged for cash are never considered de minimis, and therefore are always taxable. Out of the options provided:
- A $25 gift certificate for Rainbow Foods is taxable as it can be readily converted to cash.
- A $25 Target gift certificate is also taxable for the same reasons.
- A $25 company check is taxable as it is cash.
- A gift certificate for a ham or turkey is generally considered to be a de minimis fringe benefit because it cannot be easily converted to cash and is typically given on special occasions like holidays, so it is excluded from taxable earnings.
Therefore, option D, the gift certificate for a ham or turkey, is a de minimis fringe benefit that is excluded from taxable earnings.