ACC – Two Tax Questions

1. Buster was driving behind an armored truck when suddenly the rear door flew open and a bag containing 2 million dollars landed on the hood of his car. Buster grabbed the bag and drove off, certain that no one had seen him, since it was late at night on a lonely road. He brags to you that he has received a tax-free bonus from heaven. Is Buster correct in assuming this money is not taxable? (Be sure to give the concepts that help you decide.)2. Gretchen, 22, is a single individual with no dependents. She recently graduated from college and has received job offers from two firms. Gretchen likes both companies equally well and has decided to choose between them based on which company offers more. Details of each job offer are below.Company A – annual salary of $50,000; employer provided health and accident insurance (employer cost of $2,400); group term life insurance coverage at twice the annual salary; employer provided day-care facility (employer cost per dependent is $150 per month); and covered parking (value is $4,000 per year).Company B – annual salary of $45,000, a cafeteria plan under which Gretchen may choose benefits of up to 10% of her annual salary or take a cash equivalent. In addition, the company has a flexible benefits plan in which employees may participate by setting aside up to 10% of annual salary per year for payment of unreimbursed medical expense.Analyze the tax effects of the two job offers and then explain how each will affect Gretchen. Calculate the total after tax income (taxable and excluded) Gretchen can expect from each. Assume she has no other income and will use the standard deduction.

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