TIM IS THE VICE PRESIDENT OF WESTERN OPERATIONS FOR MAROON OIL COMPANY AND IS STATIONED IN SAN FRANCISCO.

TIM IS THE VICE PRESIDENT OF WESTERN OPERATIONS FOR MAROON OIL COMPANY AND IS STATIONED IN SAN FRANCISCO.

Tim is the vice president of western operations for Maroon Oil Company and is stationed in San Francisco. He is required to live in an employer-owned home, which is three blocks from his company office. The company-provided home is equipped with high-speed Internet access and several telephone lines. Tim receives telephone calls and e-mails that require immediate attention any time of day or night because the companys business is spread all over the world. A full-time administrative assistant resides in the house to assist Tim with the urgent business matters. Tim often uses the home for entertaining customers, suppliers, and employees. The fair market value of comparable housing is $9,000 per month. Tim is also provided with free parking at his companys office. The value of the parking is $350 per month. Calculate the amount associated with the company-provided housing and free parking that Tim must include in his gross income.

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43. LO.2 Does the taxpayer recognize gross income in the following situations?
a. Ava is a filing clerk at a large insurance company. She is permitted to leave the premises for lunch, but she usually eats in the companys cafeteria because it is quick and she is on a tight schedule. On average, she pays $5 for a lunch that would cost $8 at a restaurant. However, if the prices in the cafeteria were not so low and the food was not so delicious, she would probably bring her lunch at a cost of $3 per day.
b. Scott is an executive for an international corporation located in New York City. Often he works late, taking telephone calls from the companys European branch. Scott often stays in a company-owned condominium when he has a late-night work session.
The condominium is across the street from the company office.
c. Ira recently moved to take a job. For the first month on the new job, Ira was searching for a home to purchase or rent. During this time, his employer permitted Ira to live in an apartment the company maintains for customers during the buying season.
The month that Ira occupied the apartment was not during the buying season, and the apartment would not otherwise have been occupied.

44. LO.2, 5 Bertha is considering taking an early retirement offered by her employer. She would receive $3,000 per month, indexed for inflation. However, she would no longer be able to use the companys health facilities, and she would be required to pay her hospitalization insurance premiums of $8,000 each year. Bertha and her husband will file a joint return and take the standard deduction. She currently receives a salary of $55,000 a year. If she retires, she will spend approximately $300 less each month for commuting and clothing.
Bertha and her husband have other sources of income and are in and will remain in the

25% marginal tax bracket. She currently pays Social Security and Medicare taxes of 7.65% on her salary, but her retirement pay would not be subject to this tax. According to Bertha, she and her husband could live well if her after-tax retirement income was at least 50% of her current income. Provide Bertha with information she will need to make her decision.

45. LO.2, 5 Finch Construction Company provides the carpenters it employs with all of the required tools. However, the company believes that this practice has led to some employees not taking care of the tools and to the mysterious disappearance of some tools. The company is considering requiring all of its employees to provide their own tools. Each employees salary would be increased by $1,500 to compensate for the additional cost. Write a letter to Finchs management explaining the tax consequences of this plan to the carpenters. Finchs address is 300 Harbor Drive, Vermillion, SD 57069.

46. LO.2, 5 Bluebird, Inc., does not provide its employees with any tax-exempt fringe benefits.
The company is considering adopting a hospital and medical benefits insurance plan that will cost approximately $9,000 per employee. To adopt this plan, the company may have to reduce salaries and/or lower future salary increases. Bluebird is in the 35% (combined

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