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:

$180

$120

$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

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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