ExpertHard1 markMultiple Choice
CPA · Question 23 · Area IV: Individual Taxation
An employer provides group-term life insurance to an employee with a coverage amount of $90,000. The plan is non-discriminatory. The IRS uniform premium cost is $0.10 per $1,000 of coverage per month. How much must be included in the employee's gross income for the year?
An employer provides group-term life insurance to an employee with a coverage amount of $90,000. The plan is non-discriminatory. The IRS uniform premium cost is $0.10 per $1,000 of coverage per month. How much must be included in the employee's gross income for the year?
Answer options:
A.
$0
B.
$108
C.
$48
D.
$54
How to approach this question
Step 1: Excess coverage = Total - $50,000. Step 2: Divide by 1,000. Step 3: Multiply by rate x 12 months.
Full Answer
C.$48✓ Correct
C
Under IRC §79, the cost of group-term life insurance coverage up to $50,000 is excluded from gross income. The cost of coverage in excess of $50,000 is included. Excess = $90,000 - $50,000 = $40,000. Units of $1,000 = 40. Annual cost = 40 * $0.10 * 12 = $48.
Common mistakes
Forgetting to subtract the $50,000 exclusion.
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