00 Verizon 6:47 PM Assignment 7 Due: 12/23/17,11:59 PM 1 attempt left 25 points
ID: 2598062 • Letter: 0
Question
00 Verizon 6:47 PM Assignment 7 Due: 12/23/17,11:59 PM 1 attempt left 25 points maximum score DESCRIPTION Gallifrey Enterprises is a clothing retailer. It allows employees to purchase its products at a 40% discount, which is in line with industry practices and does not cause Gallifrey Enterprises to incur a loss on employee sal Gallifrey Enterprises also provides clothing for free to its employees. It expects the employees to wear the free clothing while on the job, showing potential customers how the clothing fits and looks on people rather than manikins. This is in line with industry practices. Gallifrey Enterprises does not restrict how the employees use the clothing: the employees own the clothing, and may wear it outside work at their own choice. The clothing is not especially suited to the conditions of employment (such as protective clothing) and is suitable for street wear Clara Oswald, the payroll manager of Gallifrey Enterprises, wants to know the tax effect to the employees of (a) the discounted clothing and (b) the free clothing. Prepare a formal memo giving her the answers. Start Attempt 1Explanation / Answer
a) TAX EFFECTS OF DISCOUNTED CLOTHING
Discounted clothing provided to employee is eligible for tax benefit. Simply we can say the sales to employee will be included with discounted value i.e 60% value. If normal sales price is $1000 and sale price for employees is $600 then $600 will be included in sales turnover.
b) TAX EFFECTS OF FREE CLOTHING
Under general tax principles, the value of employer-provided clothing is a taxable benefit unless the clothing qualifies for an exclusion.Ordinary and necessary expenses paid or incurred in carrying on any trade or business is eligible for tax benefits.
MEMO
PARTICULARS AMOUNT ($)
TOTAL SALES VALUE 1000.00
LESS : DISCOUNT (40%) 400.00
NET SALES VALUE (TAXABLE VALUE TO BE 600.00
INCLUDED IN TURNOVER)
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.