What can Chad not exclude from Carol's wages?

The correct answer indicates that Chad cannot exclude the value of Carol's meals on her days off from her wages. In general, for meals and other benefits to be excluded from an employee's wages for tax purposes, they typically need to be related to business activities or provided for the employer's convenience while conducting business. Meals provided on the employer's premises during workdays would often qualify as tax-exempt fringe benefits, as they are considered necessary for the performance of work duties.

However, meals provided during days off do not meet the necessary criteria for exclusion. When an employee is not engaged in work activities, the meals provided do not serve a business purpose, and therefore Chad must include the value of these meals in Carol's wages for tax calculations.

To further clarify, meals provided by the employer on the premises while the employee is working can often be excluded as they serve a direct business need. On the other hand, the value of meals consumed during an employee's time off does not have a direct connection to their job responsibilities, thereby requiring Chad to include these as part of Carol's taxable wages.