Under the Swan Company's cafeteria plan, all full-time employees are allowed to select any combination of the benefits below, but the total received by the employee cannot exceed $8,000 a year.

I. Group medical and hospitalization insurance for the employee, $3,600 a year.
II.

Group medical and hospitalization insurance for the employee's spouse and children, $1,200 a year.
III

Child-care payments, actual cost but not more than $4,800 a year.
IV. Cash required to bring the total of benefits and cash to $8,000.

Which of the following statements is true?
a. Sam, a full-time employee, selects choices II and III and $2,000 cash. His gross income must include the $2,000.
b. Paul, a full-time employee, elects to receive $8,000 cash because his wife's employer provided these same insurance benefits for him. Paul is not required to include the $8,000 in gross income.
c. Sue, a full-time employee, elects to receive choices I, II and $3,200 for III. Sue is required to include $3,200 in gross income.
d. All of these.
e. None of these.

a