ExpertHard1 markMultiple Choice
CPA · Question 23 · Area IV: Individual Taxation
An employee receives $150,000 of group-term life insurance coverage from their employer. The policy is non-discriminatory. The IRS Uniform Premium table cost is $0.10 per $1,000 of coverage per month. How much annual income must the employee include in gross income?
An employee receives $150,000 of group-term life insurance coverage from their employer. The policy is non-discriminatory. The IRS Uniform Premium table cost is $0.10 per $1,000 of coverage per month. How much annual income must the employee include in gross income?
Answer options:
A.
$180
B.
$120
C.
$0
D.
$60
How to approach this question
1. Exclude first $50,000. 2. Take excess ($100,000). 3. Divide by $1,000 (100 units). 4. Multiply by rate ($0.10) and months (12).
Full Answer
B.$120✓ Correct
B
IRC §79 allows an exclusion for the cost of the first $50,000 of group-term life insurance. Coverage = $150,000. Excess = $100,000. Units of $1,000 = 100. Monthly cost = 100 * $0.10 = $10. Annual cost = $120.
Common mistakes
Forgetting to subtract the $50,000 exclusion.
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