Question

As a Christmas thank you for being a good employee, Ed's TV Repair gave 62-year-old Edwina three shares of its stock worth $20 per share. Edwina then received dividends of $1 per share related to the stock. How much should be included in Edwina's gross income?

Answer 1

Edwina's gross income=$63

Step-by-step explanation:

Shares from stock and dividends must always be included in the gross income since they form part of taxable income. In our case above, we can see that Ed's Tv Repair gave 62-year-old Edwina shares and dividend payments. Gifts are often included in the gross income.

Consider Edwina's gross income as shown;

GI=(S×s)+(D×d)

where;

GI=gross income

S=stock value per share

s=number of stock shares

D=dividend payments per share

d=number of dividend shares

This can also be written as;

Gross income=(stock value per share×number of stock shares)+(dividend payments per share×number of dividend shares)

In our case;

GI=unknown

S=$20

s=3

D=$1

d=3

replacing;

GI=(20×3)+(1×3)

GI=(60)+(3)=63

Edwina's gross income=$63