Matt works for Fresh Corporation. Fresh offers a cafeteria plan that allows each employee to receive $15,000 worth of benefits each year. The menu of benefits is as follows:
Benefit________________________________________________________ Cost
Health insurance-single ....................................................... $ 5,000
Health insurance--with spouse ................................................. $ 8,000
Health insurance--with spouse and dependents ............................. $11,000
Dental and vision ................................................................ $ 1,500
Dependent care--any specified amount up to $5,000 ....................... Variable
Adoption benefits--any specified amount up to $5,000 .................... Variable
Educational benefits--any specified amount (no limit) ..................... Variable
401(k)--any specified amount up to $10,000 ................................ Variable
Cash-- any specified amount up to $15,000 plan benefit .................. Variable
For each of the following independent circumstances, determine the amount of income Matt must recognize and the amount of deduction Fresh may claim (ignore FICA taxes):
a. Matt selects the single health insurance and places $10,000 in his 401(k).
b. Matt selects the single health insurance, is reimbursed $5,000 for MBA tuition, and takes the remainder in cash.
c. Matt selects the single health insurance and is reimbursed for MBA tuition of $10,000.
d. Matt gets married and selects the health insurance with his spouse and takes the rest in cash to help pay for the wedding.
e. Matt elects to take all cash.