James, a cash basis taxpayer, received the following compensation and fringe benefits in the current year:
Salary $66,000
Disability income protection premiums 3,000
Long-term care insurance premiums 4,000
His actual salary was $72,000 . He received only $66,000 because his salary was garnished and the employer paid $6,000 on James's credit card debt he owed. The wage continuation
insurance is available to all employees and pays the employee three-fourths of the regular salary if the employee is sick or disabled. The long-term care insurance is available to all employees and pays $150 per day towards a nursing home or similar facility. What is James's gross income from the above?
a. $66,000.
b. $72,000.
c. $73,000.
d. $75,000.
e. None of these.
b
RATIONALE: The $6,000 paid to the creditor is income to James as it was used to pay his debt. The disability income protection premiums and long-term care insurance premiums are excluded from gross income.
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