Tickets From Overbooked Flights: Ethically Reportable Taxable Income or Free Gifts

Authors
Reed McKnight, Leigh W. Cellucci, Carl E. Keller Jr.
Region
North America
Topic
Accounting & Finance
Length
6 pages
Keywords
Tax avoidance
tax evasion
free gifts
taxable income
ticket vouchers
Copyright Holder
Business Case Journal
Student Price
$4.00
Target Audience
Graduate Students
Undergraduate Students

Harrison and Joan were working on their income tax return and suddenly Harrison remembered free” ticket vouchers that he and Joan had received as compensation for giving up their airline seats on one of their trips. He had not been notified that the airline had reported these to the IRS, and he wondered if they were taxable income. Did they have to include them in their tax return?

Learning Outcomes
  1. Explain economic income and the concept of taxable income as defined by the IRS.
  2. Understand the IRS concept of voluntary income tax.
  3. Analyze the business plan (profit) motivation for overbooking flights by airlines.
  4. Examine and evaluate the ethics/legality associated with tax avoidance.
  5. Examine and evaluate the ethics/legality associated with tax evasion.