Answer :
Final Answer:
Mel's gross income for the year is $3,600. This accounts for the excess reimbursement that was refunded to Easel, reducing the taxable amount, thus the correct option is b.
Explanation:
Let's break down the scenario step by step:
1. Reimbursement and Nonaccountable Plan:
- Mel receives $400 per month for business automobile expenses, totaling $4,800 for the year. This amount is considered a reimbursement.
- The plan is nonaccountable because Easel does not require employees to provide proof of expenses and allows them to keep any unspent amount.
2. Business Expense Incurred by Mel:
- Mel informs Easel that the only business expense incurred was for business mileage of 12,000 at a rate of 30 cents per mile, which is the IRS standard mileage rate at the time.
- Calculation: 12,000 miles * $0.30/mile = $3,600.
3. Excess Reimbursement:
- The excess reimbursement is the difference between what was reimbursed and the actual business expense incurred.
- Calculation: Total reimbursement - Business expense incurred = $4,800 - $3,600 = $1,200.
4. Refund to Easel:
- Mel returns the excess amount of $1,200 to Easel. This refund indicates that Mel is giving back the portion of the reimbursement that was not used for business expenses.
5. Tax Implications:
- Under a nonaccountable plan, the entire reimbursement is considered taxable income. However, any portion refunded back to the employer reduces the taxable income.
6. Gross Income Calculation:
- Initial reimbursement: $4,800
- Business expenses incurred: $3,600
- Excess reimbursement (to be refunded): $1,200
- Gross Income = Initial reimbursement - Excess reimbursement (to be refunded) = $4,800 - $1,200 = $3,600.
Mel's gross income for the year is $3,600 (option b). This is because the initial reimbursement was higher than the actual business expenses incurred, and the excess amount was refunded to Easel.
Learn more about gross income
brainly.com/question/34944866
#SPJ11
