ExpertMedium1 markMultiple Choice
CPA · Question 24 · Area 3: Individual Taxation
An employee receives ,000 of non-discriminatory group term life insurance coverage from their employer. The cost of the policy is .50 per ,000 of coverage per month. How much must be included in the employee's gross income for the year?
An employee receives ,000 of non-discriminatory group term life insurance coverage from their employer. The cost of the policy is .50 per ,000 of coverage per month. How much must be included in the employee's gross income for the year?
Answer options:
A.
0
B.
0
C.
0
D.
0
How to approach this question
Formula: (Total Coverage - 50,000) / 1,000 * IRS Cost per Month * 12 months.
Full Answer
B.0✓ Correct
The first ,000 of group term life insurance is tax-free. The cost of coverage in excess of ,000 is taxable. Excess = ,000. ,000 / ,000 = 40 units. 40 * .50 * 12 = 0.
Common mistakes
Forgetting to subtract the ,000 exclusion or forgetting to multiply by 12 months.
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