This year Ed celebrated his 25th year as an employee of Designer Jeans Company. In recognition of his long and loyal service, the company awarded Ed a gold watch worth $363 and a $2,190 cash bonus.
What amount must Ed include in his gross income?

$2,190

Explanation:

In reporting gross income cash bonuses are included included in income. This is because such bonuses are regarded as income, companies sign contracts with customers promising to pay a certain amount as bonus for meeting a certain performance target.

Awards are not considered part of gross income up to $400. Awards can be for length of service, an achievement and son on.

So the amount included in gross income is $2,190. The gold watch worth $363 is not included as it does not reach the limit of $400.

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