266. The meaning of 'money or money's worth': the convertibility principle.

'Money or money's worth' means of direct monetary value to the employee, or capable of being converted into money or something of direct monetary value to the employee1. If an employer discharges an employee's liability, the amount so paid constitutes additional earnings2. In addition to establishing taxability, the 'convertibility principle' also establishes the value that is taxable as earnings: it is the second-hand value3. However, a charge on non-convertible benefits may arise under the benefits code